Hra

BY
MANISHA VAGHELA

BY: MANISHA VAGHELA vaghela_manisha13@yahoo.com 1

Flow of presentation
Introduction Of Human Resource Accounting
Definition Of Human Resource Accounting
Objectives Of Human Resource Accounting
Advantages Of Human Resource Accounting
Limitation Of Human Resource Accounting
Human Resource Costs
Methods Of Human Resource Accounting
Conclusion
Bibliography

vaghela_manisha13@yahoo.com BY: MANISHA VAGHELA 2

Introduction of HRA
“ one asset is omitted and its worth
I want to know,
That asset is the value of men
who run the show.”

 That the value of men (human resources) is not
measured and reflected in the accounts of business
enterprise. Although the success of the business to a
greater extent depends upon the abilities, efficiencies and
power of these people who actually run the business.


HRA may be considered as such an accounting
system which recognizes the human resources as an
asset and records it is the books of account after
measuring its value in the same way as other physical
resources. Such accounting may generate and
present valuable and significant information relating
to human resources.

Employees are the greatest assets of an
organization and its success or failure depends on
the quality and performance of the employees. But
traditional accounting systems fail to indicate the
value of the most valuable asset.

Definition of HRA

 “ HRA is an attempt to identify and report
investments made in human resource of an organization.
Basically it is an information system that tells the
management what changes over time are occurring to
human resources of the business.”


 “ Human resource is the measurement and
quantification of organizational input such as recruiting,
training experience and commitment.”

 “ HRA is the process of identifying and measuring
data about human resources and communicating this
information to interested parties.”

 “ HRA is the measurement of costs and value of
the people for the organization.”


Objectives of HRA
1) Provide cost value information about acquisition,
development, allocation and maintenance of human
resources so as to achieve organizational goals in
effective manner.
2) Enable management of the organization to
effectively monitor the use of human resources.
3) Increased managerial awareness of the value of
human resources.
4) Better decisions about people, based on improved
information system.


5) Accountability on the part of management for its
human resources.
6) Developing new measures of effective manpower
utilization.
7) Enabling a longer time horizon for planning and
budgeting.
8) Better human resource planning.


Advantages of HRA
1) Information for manpower planning
2) Information for making personnel policies
3) Utilization of human resources
4) Proper placements
5) Increases morale and motivation
6) Attracts best human resources
7) Designing training and development programmers'
8) Valuable information to investors


Limitations of HRA
1) The valuation of human assets is based on the
assumption that the employees are going to remain with
the organization for a specified period. However, this
assumption is wrong because employee mobility is very
high.

2) The human resource accounting may lead to the
dehumanization in the organization. If the valuation is
not done correctly or the results of the valuation are not
used properly.


3) In the case of financial accounting, there are certain
specified accounting standards which every organization
must follow. However, there are no standards for HRA.
Each organization has its own standards for HRA. So,
there are no uniform standards for HRA. Therefore,
the HRA of two organizations cannot be compared.

4) There are no specific and clear cut guidelines for 'cost'
and 'value' of human resources of an organization. The
present valuation systems have many limitations.


5) The life of a human being is uncertain. So its value is
also uncertain.


Method of Human
Resources Accounting


Method

Human Resource Accounting

Monetary Non-
method Monetary
method


Monetary method
1. Historical cost method
2. Replacement cost method
3. Standard cost method
4. Current purchasing power method
5. Opportunity cost method
6. Economic value method

Non-Monetary Method
1. Expected Realizable value method
2. Discounted net present value of future earning


Historical cost method
This method was developed by Rensis Likert.

Historical cost method also called Actual cost method.

Two types of costs -
(a) Acquisition cost
(b) Learning cost

(a) Acquisition cost : Acquisition cost refers to the
expense incurred on recruitment, selection, and
placement.

(b) Learning cost: Learning cost refer to expenses
incurred on training and development.

Under this method, the cost of acquisition i.e.
selection, hiring, training costs of employees are
capitalized and written off over the expected useful life
of the employees. In case, the personnel leave the
company before the anticipated period of service, then
the unamortized portion of costs remaining in the
company’s books is written off against the profit and
loss account in that year. If the period of service
exceeds the anticipated time, then amortization of
costs is rescheduled.


Advantages

This method is sample to understand and easy to
work out.

The traditional accounting concept of matching cost
with revenue is followed in this method.

It can provide a basis of evaluating a company’s
return on its investment in human resources.


Advantages

This method is that the effect of HRA can be shown
on conventional balance sheet and profit and loss
account because the information in these statement
is also stated on historical cost basis.


Limitation
 It is very difficult to estimate the number of years an
employee will be with the firm.

 It is difficult to estimate the number of years over
which the capitalised expenditure is to be amortised.

 It is difficult to determine the rate of amortisation.
Should it be increasing, or decreasing.


Limitation

 The economic value of human resources increases
over time as the people gain experience. But in this
approach, the capital cost decreases through
amortisation.


Replacement cost method

This approach was first suggested by Rensis Likert,
and was developed by Eric G. Flamholtz on the basis of
concept of replacement cost.

Under this method, replacement cost refers to the cost
of replacing an existing employee. Replacing cost is the
cost that would cost to replace the existing human
resources with human resources capable of rendering
equivalent services. Here, the underlying costs included


in replacement cost are the cost of recruitment,
training and development, opportunity cost for the
intervening period till the new recruit attains the
efficiency level equal to that of the old employee.

According to Likert (1985) replacement cost include
recruitment, selection, compensation, and training
cost (including the income foregone during the
training period). The data derived from this method
could be useful in deciding whether to dismiss or
replace the staff.


Advantages

 This method has the advantage of adjusting the
human value of price trends in the economy and
thereby provides more realistic value in inflationary
times.

 It has the advantage of present oriented.


Limitation
 It may not always be possible to obtain such a
measure for a particular employee.

 It is not always possible to find out the exact
replacement of an employee.

 This method does not reflect the knowledge,
competence and loyalties concerning an organization
that an individual can build over time.


Limitation

 It is difficult to find out the cost of replacing
human resources and different persons may arrive at
different estimates.


Human resource costs


Costs incurred on locating, selecting and training
employees are the capital component of investment in
human resources. These are similar to the costs of fixed
assets, e.g. purchase price and cost of installation.
various types of human resource costs
Recruitment costs
Selection costs
Hiring and placement costs
Orientation costs
Training costs
Development costs

• Recruitment costs:

The costs are incurred to identify
the possible sources of employees, e.g. ,
advertising, travel, fees of employment,
agency, company’s recruitment, etc.


• Selection Cost:

Selection is the managerial decision
making process as to predict which job
applicants will be successful if hired.

Cost of application forms, testing,
interviews and allocated administrative
overheads.

Orientation costs
costs incurred to familiarize the new employees

Facilities Products

Programmers
Policies

employee
Regulation
Rules

• Hiring and Placement Costs:

Travel expenses to select
employees, expenses for moving to the firm’s
place, etc.


• Orientation Costs:

Costs incurred to familiarize the
new employees with polices, facilities, products,
etc. of the firm.


• Training Costs:

Trainer’s salary, training facilities, low
productivity during training, etc.


• Development Costs:

Costs incurred to increase the
employee’s capabilities beyond immediate skills
required for the job, advancement, e.g. , fees
and expenses for attending seminars and
executive development programmes.


Review of presentation
Introduction of HRA
Definition of HRA
Objectives of HRA
Advantages of HRA
Limitation of HRA
Method of HRA


Conclusion
 So, from the above presentation we can easily
understood human resource cost related to historical
and replacement method.

 Human resource cost includes Recruitment costs,
Selection costs, Hiring and placement costs,
Orientation costs, Training costs, Development costs.
Also measuring the employee and achieve
organisation goal.


Bibliography

 Human resource management and Industrial
relation
- Dr. Jayshree Thakare
- R. K. Balyar

 Human resource management
- C. B. Gupta


 Human resource management
- S. S. Khanka

 Website
Human resource cost.com
Human resource method.com


Questions
 What is definition of HRA ?
 How many cost of Human resource cost ?
 HRA is part of HRM ?
- Yes/No
 What is Historical cost method ?
 HRA Method useful in organization ?


Hra

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Semelhante a Hra

Semelhante a Hra (20)

Mais de SMART LEARNING -SEE YOUR WORLD IN DIFFRENT WAY

Mais de SMART LEARNING -SEE YOUR WORLD IN DIFFRENT WAY (20)

Último

Último (20)

Hra