Human Resource Accounting (HRA) is a system for identifying and measuring employee data and transmitting this information to stakeholders. It is an attempt to identify and report Investments made to the organization’s Human Resources that are currently not accountable for Accounting Practices.
The Purpose of Human Resource Accounting
Employee Accounting Policy The Statement of Employee Competition on Financial Conditions. This concept can be processed from 2 guidelines i.e.
Personnel Expenses ie costs incurred in hiring, hiring, and training Staff Level, and the value of Human Resources i.e. the potential yield of the above investment in the future.
The Importance of Human Resource Accounting
The 21st century has been dubbed the Century of the Service. Every major expansion seems to be taking place in the service sector and the growing scope of the manufacturing sector is small.
But are Accountants able to properly inform this Service Area and demonstrate this in the Company’s Balance Sheet?
For any Company operating in the Manufacturing Sector, its main assets are Machinery and Fixed Assets but for the Company operating in the Service Sector, its main assets are its Intangible Assets. In a Service Sector company, the number of employees is gaining value as the income is based on the pay per employee per hour, and the profit is linked to the value-added by the employees.
The concept of Human Resource Accounting was developed primarily by the service sector and has now begun to gain so much importance that now Companies in all Departments have used HR Accounting and there is a good weight given to these reports in any Company Analysis.
Benefits of Human Resource Accounting
The main benefits of Human Resource Accounting are: –
- HR Accounting helps a company determine how much Investment it has made for its employees and how much they can expect from this investment.
- The Ratio of Human Capital to Non-Human Capital is calculated according to the Employment Census perspective showing the level of Labor Intensity of the organization.
- HR Accounting provides the basis for real estate planning in line with staff.
- HR Accounting provides valuable information to investors who are interested in making long-term investments in the Service Sector Companies.
Conclusion
Traditional accounting processes ignored the value of personal assets in an organization and preferred to regard it as a cost and a useful factor. This very anti-workers attitude is contrary to the interests of the working class.
