HUMAN RESOURCE ACCOUNTING

INTRODUCTION

DEFINATION:- Human Resource Accounting is a method to measure the effectiveness of personnel management activities and the use of people in an organization.

DEVELOPMENT OF HRA:- William Petty in 1971 made the first attempt to value the human being monetary term’s. He was of the opinion that labour was the father of the wealth and it must be taken into consideration while making an estimate of wealth. Efforts were further made by William far 1853 and Earnest Engel 1883 in this connection.

NEED OF HRA:- The primary role of accounting is to provide an effective measurement and reporting system for decision making. It is an effective tool for decision making.

v Decision regarding cost reduction programmes.

v Training and Development.

v Recruitment and selection.

v Manpower planning and control.

v Conservation and reward of human resource.

DISCUSSION

Models of HRA:-There are mainly five models of HRA.

Historical Cost Approach:- According to this approach the actual cost incurred on recruitment, selecting, training, Developing and placing The human resource of an enterprise are capitalize and written off over the expected useful life of human resource.

Replacement Cost Approach:- This approach measures the cost of replacing an 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.

Present value Approach:- Lev and Schwartz 1971 proposed an economic valuation of employees based on the present value of future earnings, adjusted for the probability of employees death/separation/retirement. This method helps in determining what an employee’s future contribution is worth today. According to this model, the value of human capital embodied in a person who is ‘y’ years old, is the present value of his/her future earnings from employment and can be calculated by using the following formula: E(V_y) = Σ P_y(t+1) Σ I(T)/(I+R)^t-y.

Benefits of HRA:-

Improves managerial decision-making.

Serves social purpose.

Increase productivity.

Helps in investment decisions.

Completes MIS.

For successful operation of an organisation.

Limitations of HRA:-

Unlike physical assets.

Self-employed persons are ineligible.

"Highly compensated" participants may be subject to "certain limitations".

Life of HR is uncertain.

CONCLUSSION

An HRA-based predictive model appears to be a reasonable alternative to claims-based predictive models for identifying individuals for chronic condition management outreach. Where practical, a combined model offers advantages of both approaches and meaningfully increases accuracy.

By: Future Managers Group

MB 1 Aamna (A) = Meaning and Need of HRA

MB 62 Ashish (B) = Methods of HRA

MB 128 Ankit (C) = Merits and Demerits of HRA