Human resource accounting, Accounting Basics

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Human Resource Accounting:

Way back in the year 1964 the first attempt to comprise figures on human capital in the balance sheet was made through Hermansson that later came to be termed as Human Resource Accounting. Although there had been a huge socio-economic move in the 1990year's  along with the emergence of "Knowledge economy", a distinctive move towards recognition of human and intellectual capital in contrast for physical capital. Human Resource Accounting is a division of accounting that seeks to report and emphasis the significance of human resources that is knowledgeable, loyal, trained and committed workers in a company's earning method and total assets. This is involved with "the process of knowing and  measuring  data  regarding  human  resources  and  communicating such information to interested parties". In easy words such includes accounting for deal in people and replacement costs and also accounting for the economic values of people to an organization. Usually the methods utilized for valuing and accounting of  human  resources are  either  depends  on  costs  or  upon  economic value  of  human resources.  Conversely providing adequate and  legal  information on  human  benefits or capital, that are outside the notion of ownership, in figures is very complex. However HRA is a managerial tool giving valuable information to the top management to  acquire decisions about adequacy of  human resources and hence encouraging managers to identify investment in manpower in a more positive manner.


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