Recruiting – Originates with the search for human resources. They have given the following formula for calculating the value of an individual: Vr = the human Capital value of a person; r years old. Businesses which require a considerable However, this method suffers from the following disadvantages: (a) The method relies on earnings of the previous year to calculate the rate of return but to determine economic value of the future earnings are required. With the accelerated growth in science and technology the value of human capital is gradually increasing and hence it is essential for a company to reflect the investment in human resources. Should HR be accounted in the Asset Column? Cost consciousness in human resource management demands for human resource accounting. Orientation – This is hardly estimable and refers to familiarizing the new employee with the HR policy, products and services of the organization, and the organization in general. Productivity per employee seems to be the most adequate measure. The skills, knowledge and experience of each individual contribute to the growth of organizations, communities and nations. Careers for Business Majors with a Minor in Accounting. And truly enough HR has also evolved, wherein its functions of hiring, paying salaries, benefit administration, developing and retaining employees, etc., have been translated into quantitative terms in order to monitor results and facilitate changes. Human resource is always related to one organization profitability and their ability cannot be replaced by machines. It is left to the discretion of the accounting bodies that have yet to develop a generally accepted basis for valuation, recording and disclosure of human resource accounting information in the financial statements of an organisation. Rensis Likert and Pyle suggested determination of the value of total human organisation on the basis of the assumption that a new similar organisation has to be created from the scratch. 4) HRA system helps in increasing productivity of HR, would boost the morale, loyalty and initiative of the employees. 3. The product of these two variables is the present worth of services expected to be derived by an organisation. In other words, human resource data may provide the basis of setting up a standard cost accounting system for human resource costs, similar to that for manufacturing costs. How Much Money Does an Accounting Supervisor Make? The model is based on the presumption that a person’s value to an organisation depends upon the positions to be occupied by him in the organisation. According to the theory of accounting for HR propounded by Flamholtz E.G. This belief gets reinforced when one finds that the human resource – but for whose direction and effort “plants, offices, computers, automated equipment and all else that a modern firm was/are unproductive” – find no place in the annual report of a business enterprise just because of the simple reason that the customary accounting system is based on the conventional of monetary valuation and the doctrine of verifiable objective evidence which tritely rule out the ease of accounting for human resources. Rewards – Cash-like and non-Cash-like Facilities – Tools, Fixtures/ Fittings and accessories at work essential for the welfare of the employees. For capital equipment and assets Joel Dean has defined opportunity costs as “the most profitable alternative use that is fore gone by putting it to its present use.” The concept of opportunity cost envisages the special situation where an undertaking has several divisions seeking the services of the same employee. This method over comes the drawbacks of the Flamholtz’s Stochastic Reward Valuation Method. He may be a valuable person for the department in which he is working and hence may have a lower price in the bid by the other department. Successful HR professionals in today's competitive global market need to be financially intelligent. The expected reliable value of an individual is the present worth of future services expected to be provided during the period he is expected to remain in an organisation. Estimating the value derived by the organisation when a person occupies a particular position for a specified time period. It helps employees in improving their performance and bargaining power. Budgeting for training and development programmes for employees involve assessment of the value of proposed investment in such programmes and estimating the cost of such programmes. its assets value and the cost of procurement; HR is not an exception. Questions or problems? Methods 11. Human Resources → New research on human resources from Harvard Business School faculty on issues including organizational design, compensation, incentive … It means that some become liability too instead of being human assets. 2. 6. However, human resource is still the most important element to determining the success or failure of an organization. What is Human Capital? In the HRA approach, expenditures related to human resources are reported as assets on the balance sheet as Human valuation is not concerned with humans per se. This method is expensive to operate. HRA facilitates decision making about the personnel i.e., either to keep or dispense with their services or to provide training. If the employee can easily be hired externally, there is no opportunity cost of them, Bidding takes place only for those employees who are scarce. Human resource accounting has been defined by the committee on Human Resource Accounting of the American Accounting Association as “the process of identifying and measuring data about human resources and communicating this information to interested parties.”. Hekimian and Jones have also advocated the use of replacement costs method when they say that In essence, we would value a human being at the estimated cost to us of replacing him with another person of equivalent talent and experience. They are valuable only when such qualities serve as a means to achieve the organizational goals. It includes like advertising, application processing, screening, conduct test, interviews, and remunerations. HRA can be useful in the evaluation of human resources by developing appropriate -methods, including both monetary and non-monetary measurements. Morse suggested this approach. So the HRA is needed in this context. Human resource value accounting also includes, some methods such as, jaggy and law method, Net benefit method, Economic value method, Present value of future earnings, and Adjusted discounted future wages method. If the rate of return is different from the normal rate, it may fairly presumed that some resources must be existing that have not been taken into account in preparing the balance sheet. This approach presents new-hire orientation as a profit-contributing business driver, not merely an HR nicety. The first step in human resource acquisition is to forecast manpower requirements; the management must then translate the manpower forecast into a manpower acquisition budget, which is essentially a process of cost estimation. The individual’s conditional value, and. However, in practice, many companies, such as Bharat Heavy Electrical Ltd., Cement Corporation of India, Minerals and Metals Trading Corporation of India, Oil and Natural Gas Commission, steel Authority of India Ltd., Oil India Ltd., Hindustan Shipyard Ltd., Satyam Technologies Ltd., Associated Cement Company, TATA Engineer­ing and Locomative Works, Southern Petrochemical Industries Corpora­tion, Satyam Infosys Ltd., Wipro Ltd., Global tele-systems Ltd. Concept of Human Resource Accounting 3. Human Resource Accounting provides useful information to the management, financial analysts and employees as stated below: 1. The aggregate present value of different groups represents the capitalised future earnings of the firm as a whole. [V] = Column vector indicating the economic value of an employee of rank ‘I’ during each period. The advance equipments, new technology, good marketing strategic, excellent customer services and many other elements can be the factors to build up for the advantages. REo = The average rate of accounting income on owned assets for all organisations in the economy for current year. If the accounting system incorporates the value of a firm’s human resource and its changes over time, the ‘net income’ might be adjusted to reflect changes in the value of human resources. The value of direct and indirect future payments to the employees is determined. To profile the enterprise and improve its image. It involves measuring the costs incurred by business firms and other organisations to recruit, select, hire, train and develop human resources. (iv) Determining the cost of hiring, maintaining, developing and motivating human resource is important for making the organisation cost-effective. Average earnings stream for different classes and age groups are prepared for each group separately and the present value for the human capital is calculated. [N] = Column vector indicating the number of employees currently in each ranks. Aspects 6. Cost of Promotion – It originates every time an employee changes his job in the same category or another due to promotion.

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