February 5, 2019 Accounting



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Human resource Accounting is the combination of three things i.e Human, resource and Accounting. Before we go through the discussion about Human resource accounting we have to know the following things.

New shorter oxford English dictionary defines, human as people, pertaining to human kind or belonging to the species.

Chambers 20th century dictionary defines, human, as pertaining to or of the nature of man or mankind or having the qualities of man.

Websters New Oxford Dictionary defines human, as typical or mankind or produced by men.

Standard Illustrated Dictionary defines ‘human’, as pertaining to man, of man as opposed to God.

The Oxford English dictionary defines, human, as characteristics of man (contrasted with God, animal or machines) : or showing quality of man.


The new shorter oxford English Dictionary defines ‘Resource’ as a means of supplying a deficiency a stock or reserve which can be drawn when necessary. The collective means possessed by a country for its own support or defense, possibility of aid or assistance.

Chember 20th century dictionary defines ‘Resource’ as ‘Source’, possibility of help, money or means of raising money, means of support.

Webster’s New World dictionary defines the ‘resources’ as ‘something ready for use or available as needed, wealth, assets, and means to an end’.

From the above definition it is very clear that resource means, a reserve or stock or funds which are ready for use or available when necessity arises or man that can be used as, means of resource. A resource is a source or supply from which a benefit is produced.

Every organisation is made up of people and function through people. Without people organisations cannot exist. The success of an organisation largely depends upon its human power. An organisation is said to be most powerful which deals with its human resources effectively and efficiently. In 21st century everything is done through technology but technologies cannot operate itself without the help of human being. Men are the most powerful resources because it controls and operates The “M”s like Machine, Method, Material, Money etc. The effective utilisation of all other resources are largely depends upon the Human being. Therefore human resources are called Human assets or human capital. It is the most important assets of the firm. This human is such kind of asset whose value cannot not be decreased at any circumstances. One and only one asset is there which has its own feelings, emotions, sentiments, and affections etc. So there is a greater need of handling human resources carefully. The most valuable of all capital is the investment in human being. Thus, this feature of the human asset places the human resources at a higher level than the non-human assets. Therefore, the investment on human resources has become an important factor in accounting systems. In fact, in the present accounting system, the investment on human resources is considered as only revenue expenditure and not as capital expenditure. Hence, the amount invested on human resources is not shown in the balance sheet along with other assets. This deficiency can be very well ratified through the concept of Human Resource Accounting (HRA). Though the other physical assets get value when they are combined with human resources, the accountants have not recognised the human assets as the prime asset of the organisation. Yet the top managements always remark consciously or unconsciously that, ‘the people are our most important assets. Human is the core factor and which is required to be recognized prior to any other ‘M’s But till now an urgent need based modification is required while identifying and measuring data about human resources. In this paper my objective is to identify the extensive use of Lev & Schwartz model of Human resource accounting, in spite of several criticized from various sides regarding its applicability. Furthermore, it also portrays the applicability in wide variety of organization of such model (some pubic sector units and IT based sector). Human is the buzzword in the modern knowledge based society. It is the most vital input on which the success & failure of the organization very much depend upon. Starting from the classical economist to modern human capital economist such development in considered to be a continuous process. It is one of the most important ‘M’ associated, which is considered while taken care of 4M’s associated with any organization and they are money machines, materials and men. But the most interesting thing is that the first three are recognized and find a place in the assets side of the Balance sheet of the organization. But in case of fourth one ambiguity prevails among the accountant. In spite of its usefulness has been acclaimed is various literature over the decades but its application still remain a susceptible issue, the IASB and the ASB in different countries have not been able to formulate any specific accounting standard for measurement ; reporting of such valuable elements. It is a popular phenomenon among the Indian corporate world is to disclose information relating to human resource in annual statements. In this context, it is necessary to conduct a study to assess the disclosure pattern of HRA information in Indian corporate World. The effective and efficient use of the physical assets largely depends on the skills, ability, quality, perception and character of the employees. Manpower is considered as the most important capital and the main source of competitive advantages, creation of basic functionalities and real wealth of any organisation. Therefore investment in the areas of talent identification, performance monitoring and enhancement of skill, correct guiding of manpower and effective policy making are essential for the promotion. Human as a main element of management can bring development and /or acts as a major obstacle for development. These human resources have potential abilities that are actualised in organisational environment. Human resources are involved more than other factors in maintenance and expansion of performance level. So rightly it can be said that if you gave a fish to a man, he got a meal but if you trained a human he got how to live. In the light of this statement we conclude that the soul of any organisation is not physical assets but the organ that propels them.


? Human Resources as: “The people that staff and operate an organization,” as contrasted with the financial and material resources of an organization. A Human Resource is a single person or employee within your organization”.
William R. Tracey

? ” Business houses are made or broken in the long run not by markets or capital, patents or equipment but by men.” Of all the resources manpower is the only resource which does not depreciate, with the passage of time. This resource is called as man power. L.W. Urwick

? Human resources refer to the “Total knowledge, skills, creative abilities, talents and aptitudes of an organisation’s workforce, as well as the values, attitudes and believes of the individuals involved.” Leon. C Megginson

? ”Human Resource is ‘a body of men, not a complex of matter, but a complex of humanity”. Sheldon


? “A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.” Jeff Bezos

? “The human brain is an incredible pattern-matching machine.” Jeff Bezos

? ” I will always choose a lazy person to do a difficult job , because he ill find an easy way to do it.” Bill Gates. CEO Microsoft.

? “you must treat your employees with respect and dignity because in the most automated factory in the world, you need the power of human mind. That is what brings in innovation. If you want high quality minds to work for you, then you must protect the respect and dignity. ”
Mr N.R. Narayana Murthy, Chairman Emeritus, Infosys Ltd .

? “Our progress as a nation can be no swifter than our progress in education. The human mind is our fundamental resource.”
John F. Kennedy (35th President of the United States).

? “The greatest tragedy in America is not the destruction of our natural resources, though that tragedy is great. The truly great tragedy is the destruction of our human resources by our failure to fully utilize our abilities, which means that most men and women go to their graves with their music still in them.”
Oliver Wendell Holmes.

? “I emphasize this – no matter how good or successful you are or how clever or crafty, your business and its future are in the hands of the people you hire”.
Late Akio Morita ( co-founder of Sony Corporation. Japan)

? “Human resources are like natural resources, They are often buried deep. You have to go looking for them. They are not just lying around on the surface”.
Ken Robinson

? “There is no deficit in Human resources, the deficit is in human will”.
Dr. martin Luther King
? ” Great vision without great people is Irrelevant”.
Jim Cooling
? ” Financial resources may be the Lifeblood of a company but human resources are the brains”.
Rob Silzer


“Human resource accounting is accounting for people as an organizational resource. It involves measuring the costs incurred by business firms and other organizations to recruit, select, hire, train and develop human assets. It also involves measuring the economic value of people to the organization.
Human Resource Accounting (HRA) is a new branch of accounting. It follows the traditional concept that all expenditure on human capital formation is taken as a charge against the revenue of the period as it does not create any physical asset. Modern view is that cost incurred on any asset as human resources need to be capitalized as it provides benefits measureable in monetary terms. Measurement of cost and value of the people to organizations is highly important, costs incurred in recruitment, selection; hiring, training and development of employees along with their economic values are very much relevant for Human Resource Accounting. The current trends in corporate reporting practices are the inclusion of the following supplementary accounting information in India and abroad:
1. Human Resources Accounting
2. Social Accounting
3. Inflation Accounting
4. Segment Accounting
5. Value Added Accounting
6. Environmental Accounting
In general Human resources accountingnowledge, skills, competence, motivation and accepting the organ


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