Human Resource Accounts Practices in India

Human resource accounting has very high significance not only for the management, but also for analyst and even for employees. It helps management in better utilization, planning management of human resources in the organization while for analyst, Even today, when a good deal of work has been done in this field, it is very much unfortunate that there is not only set pattern or generally accepted method either for valuation of human resource or for their recording in books of accounts or for the disclosure of information by means of different statements. The study focuses on the calculation of the value of human resources at different levels of organization & to determine the human resource efficiency quotient.

The rationale behind introduction of HRA lies in the fact that human resources should be treated as physical assets and should be shown on the asset side of the balance sheet. Failing to exhibit such assets on the face of the balance sheet in the traditional accounting system indicates lack of reliability of the financial picture. Recognition of human resource as asset removes the obstacles of traditional accounting practice and reflects the actual financial status of an organization. HRA deserves the following benefits:

1. Any change in the investment in human resources affecting the earning capacity and growth of an organization cultivates the concept of HRA in which assets status is accorded to human resources and accordingly brought into account like other assets.
2. Acquisition, training and placement costs of human resources for productive purposes should be capitalized. HRA first justifies this truth. It will help the management in planning and executing personal policies.
3. Expansion of building, plant & machinery etc. obviously leads to enhancement in human resources. Hence, information in the form of HRA is necessary.
4. Additional information in the form of HRA inspires the shareholders and creditors to make long-term investment with confidence.
5. Cordial relationship among the employees in an organization is possible only when management realizes the importance of contribution made by the employees and workers in an organization.
6. HRA can be used as a tool in detecting the spirit of labor turnover, return on investment and utilization of potential capacity of an organization.
7. HRA helps in solving industrial disputes and collective bargaining process as management representative can put forward data in a systematic manner.