Question

you are required to state the objectives and its importance of HRA with suitable example

Answer 1

Human resources accounting, abbreviated as HRA, refers to the accounting for human resources in an organisation namely, the trained, knowledgeable, and loyal employees who makes their participation in the process of earning and total assets. It is the quantification and measurement of human resource inputs in organization, such as training, recruiting, experience and commitment. The main objectives of HRA are:

1. Providing the relevant data related to the human resource to the management and help them in process of decision making

2. To assist the managers in evaluation of the performance of its personnel and computation on the return on investment

3. HRA help the management in planning as well as controlling the many activities or functions related with its human resource such as planning on man power, training, recruiting, and retirement etc

4. Computation of the appreciation or depreciation among human resources. For example various techniques are employed to determine the employee performance

5. It helps in the identification and controlling numerous concerns related with human resources

Its important in an organisation as its adoption plays the role of the motivating factor among the employees as it is shown in company's financial statements. It helps the managers in efficiently usage of the man power by giving quantified information data. For example, high training costs can warrant to look at the returns over a specified time frame, incurred expenses in the additional recruitment related to the specific employees category can indicate the requirement for a better compensation plan for them. Moreover HRA also gives feedback to top level managers even on their own performance. HRA is vital also for the potential investors in assessment of the true value of an organisation by providing realistic information about the human resource. For example: On the basis of information provided on company's human resources the potential inves­tors may decide which organisation be picked up to make investment.