Download - Human resource accounting (1)
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Human Resource Accounting
Submitted By :Gaurav ( 12020241078)Isha Gupta ( 12020241079)
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Introduction Objectives of HRA Importance of HRA Limitations Cost of Human Resources Measurements in HRA Cost Approach
Contents
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Process of identifying and measuring data about
human resources and communicating this information to interested parties
Quantification of the economic value of the people in an organization
Measurement and reporting of the cost and value of people in organizational resources : Flamholtz
Art of valuing, recording and presenting systematically the worth of human resources in the books of account of an organization
Introduction
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1. Valuation of human resources2. Recording the valuation in the books of
account3. Disclosure of the information in the financial
statements of the business
Contd…
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Improve management by analyzing
investment in HR Consider people as its asset Attract and retain qualified people Profile the organization in financial terms To have an analysis of the human asset To aid in the development of management
principles, and proper decision making for the future
Objectives
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Furnishes cost/value information for making management decisions
about acquiring, allocating, developing, and maintaining human resources in order to attain cost-effectiveness
Helps the management in the employment, locating and utilization of human resources
Helps in deciding the transfers, promotion, training and retrenchment
of human resources
Assists in evaluating the expenditure incurred for imparting further education and training in employees in terms of the benefits derived by the firm
Importance of HRA
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Management tool designed to assist senior management
in understanding the long term cost and benefit implications of their HR decisions
Helps in identifying the causes of high labour turnover at various levels and taking preventive measures to contain it
Helps in identifying improper or under-utilization of physical assets or human resource or both
Provides valuable information for persons interested in making long term investment in the firm
Contd…
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No specific procedure for finding cost and
value of human resources of an organization Form and manner of including HRA value in
the financial statement is not clear Employee with a comparatively low value may
feel discouraged Tax laws do not recognize human beings as
assets
Limitations
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Cost of Human
Resources
Acquisition cost
-Recruitment Cost-Selection Cost-Placement Cost -Campus Interview Cost
Training (Development) cost
-Formal Training Cost -On the Job Training Cost-Special Training-Development Programmes
Welfare Cost -Medical Expenditure -Canteen Expenditure-Specific and General Allowances-Children Welfare Expenses-Other Welfare Expenditure
Other Costs -Safety Expenditure-Ex-gratia-Multi-trade incentives-Rewarding Suggestions
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Measurements in HRA
• Historical Cost• Replacement Cost• Opportunity Cost• Standard Cost
Cost based approaches:
• The Lev and Schwartz Model (Present value of future earnings method)• The Eric Flamholtz Model (Reward Valuation method)• Morse Model (Net Benefit Model)
Monetary value based approaches:
• Likert Model• The Flamholtz Model• Ogan Model (Certainity Equivalent Net Benefit Model)
Non- monetary value -based approaches:
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Cost
It is a sacrifice incurred to obtain some anticipated benefit or service
Two portions :
ExpenseAsset
COST APPROACH
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Historical cost Sacrifice that was made to acquire and develop the resource
Opportunity cost Money to be spent on HR was spent on something else
Replacement cost Cost incurred in the replacement of present employees
Types of Cost