Human Resource Accounting and Its objectives

Definition

It can defined as a system of accounting that identifies, quantifies and measures human resources for the use of the management to maintain a balance between the required material resources and the available human resources. It involves valuation, recording and systematic presentation of the worth of human resources in the institution’s books of account.

Objectives of Human Resource Accounting

Improve management by analyzing investment in Human Resources: Human Resource accounting is an important tool for management since it helps in analyzing the level of investment in Human resources. This enables managers to invest optimal level of resources in relation to the available human resources.

Consider people as its asset: Human Resource Accounting serves to the concept that employees constitute the organization’s most valuable assets and as such it is important to acknowledge the worth and maintain accurate records of the skills and competencies that contribute to the organizations objectives.

Attract and retain qualified people: Human Resource accounting helps the organization to attract and retain talents in order to achieve and maintain a competitive advantage.

Profile the organization in financial terms: Human resource Accounting helps to build a profile of the organization in financial terms. There are quite a number of aspects of human resources which for a very long time have not been analyzed from a financial perspective. Human Resource Accounting therefore provides a basis of valuation of such qualitative aspects in order to develop an organizational profile that can assist in financial decision making.

Planning and Control: Human resource accounting is an important tool in planning and control. It is a critical component of Strategic Human Resources that seeks to have human relation at the center Strategic management. Thus, it informs the extent of human contribution to the realization of the organizational objectives.