Human Resource Accounting

Human resource Accounting is the process of identifying and reporting the Investments made in the Human Resources of an Organisation that are presently not accounted for in the conventional accounting practices. In simple terms, it is an extension of the Accounting Principles of matching the costs and revenues and of organising data to communicate relevant information in The Quantification of the value of Human Resources helps the management to cope up with the changes in its quantum and quality so that equilibrium can be achieved in between the required resources and the provi Human Resource Accounting provides useful information to the management, financial analysts and employees as stated below:-

1. Human Resource Accounting helps the management in Employment and utilisation of Human Resources.
2. It helps in deciding transfers, promotion, training and retrenchment of human resources
3. It provides a basis for the planning of physical assets vis-a-vis human resources
4. It helps in evaluating the expenditure incurred for imparting further education and training of employees in terms of the benefits derived by the firm.
5. It helps to identify the causes of high labour turnover at various levels and taking preventive measures to contain it.
6. It helps in locating the real cause for low return on investment, like improper or under-utilisation of physical assets or human resources or both
7. It helps in understanding and assessing the inner strength of an organisation and helps the management to steer the company well through the most averse and unfavourable circumstances.
8. It provides valuable information for persons interested in making long term investments in the firm.
9. It helps the employees in improving their performance and bargaining power. It makes each employee understand his contribution towards the betterment of the firm vis-a-vis the expenditure incurred by the firm on him