1. Q.1 What is Human Resource Accounting? Also explain the different methods
of Human Resource Accounting.
Human Resource Accounting:- Human Resource Accounting(HRA) shows the
investment the organisation makes in its people and how their value change over a period
of time .It is similar in principle to the financial accounting. That is just as financial
accounting reflects the costs of assets such as building and machinery, human resource
accounting implies human resources as capital not as expense.
In simple words , we can say that HRA is a sophisticated way to measure the
effectiveness of personnel management activities and the use of people in an organisation.
According to the AMERICAN ASSOCIATION OF ACCOUNTANTS:-“HRA is process
of identifying and measuring data about human resources and communicating this
information to interested parties”
The basic theory underlying the Human Resource Accounting is:-
1)That people are available resources of an organisation/or enterprise.
2)Information on investment and value of Human Resource is useful for decision making in
the organization.
On the basis of above definition it can be defined as the measurement and reporting of the
cost on human resources and their present value s to the organisation. The main purpose
of HRA is to facilitate the effective and efficient management of human resources of an
organisation by making the information available on their acquisition, development,
retention and evaluation etc.
Methods of Human Resource Accounting
The accountants and finance professionals have suggested various methods for measuring
the value of human resources utilized in an organisation. These for the convenience of the
readers may be broadly classified into two categories:
(1) Monetary Methods
(2)Non-Monetary
1. Monetary Method :These methods are best on cost of economic value of Human
Resources.Under this methods human resources of an organisation are translated into a

2. common denominator.There are the seven important monetary methods for measuring
human values in an organisation.
(a) Historical Cost Method:This method is develop by Rensis Likert.Under this method all
actual cost incurred on recruitment,training,familiarisation etc.are capitalized.The
advantage of this methods is that the value of human asset can be shown on conventional
Balance Sheet and Profit and Loss Account.It is the measurement of investment that is
unigonored made on individuals to check the performance that is investment of recruitment
and training and development.
(b) Replacement Cost Method: The replacement cost of human resources is the cost that
would have to be incurred if present employees are to be replaced. For instance, if an
employee were to leave today, several costs of recruiting, selection, hiring, placement,
orientation, and on the job training would have to be incurred in order to replace him. Such
costs have two dimensions- positional replacement costs or the costs incurred to replace
the services rendered by an employee only to a particular position; and personal
replacement cost or the cost incurred to replace all the services expected to be rendered by
the
employee at the various positions that he might have occupied during his work life in
the organisation. Though replacement cost method can be adapted for determining the cost
of replacement of groups, this method is used essentially to determine the replacement
cost of individuals.
(c) Opportunity Cost Method :This method is used to value employees possessing certain
skills and,thus,are rate in availability.Under this method the employees are measured on
the basis of their ulternative uses.If we compare to employees have more ulternative
utilizations that will be considered as higger performer.
(d) Economic Value Method:Under this method,human asset is valued on the basis of the
contribution they are likely to make to the organisation till their retirement from the
jobs.The payments made to them in the form of pay,allowances,benifits,etc.,are estimated
and then discounted appropriately to arrive at the present economic value of the
individuals.This model can be expressed in the following formula.
Vr=
r-r(i+r)
Where,
the human capital value of an individual r years old.
the individual’s annual earning upto retirement by the earning profile.
discount rate i.e.,cost of capital
retirement age.

3. The drawback of this method is that the under or over-fixation of salary may affect equating
the total earning to the human capital.
(e) Standard Cost Method:In this method standard costs of recruiting,hiring,training and
developing per grade employee are developed and established and made upto date every
year.The standardcost so arrived at,for all persons are treated as the value of human
resources for accounting purposes.This is an easy method for implementation and the
variances produced should be analysed and would form a useful basis for control.
(f )Current Purchase Power Method:Under this method the historical cost of investment in
human resources is converted into current purchasing power of money with the help of
index numbersThe standard cost method an the current purchase power method also suffer
from all the drawbacks of the replacement cost method except that they are simplest in
calculation.
Eg. Employee(E1):20000 in 1980
E2 :35000 in 2000
(g) Asset Multiplier Method:This method is based on the assumption that there is no direct
relationship between cost incurred on an employee and his value for the organisation.This is
because the value of an employee depends on factors like motivation,working conditions
and their attitude toward work and organisation.
Human Resources Accounting
Human Human Resources
Resource Value Accounting
Cost
Accounting Assestment and
recording the
Personal Human Value Contribution
Cost Asset of the members
Accounting Accounting Human Resources
to the production
Acquisition Development and processes
Cost Cost Sacrifice
Incurred

4. To acquire or
Replace people
(2) Non-Monetary Methods:- The non-monetary methods for assessing the
economic value of human resources also measure the Human Resource but not in dollar or
money terms. Rather they rely on various indices or ratings and rankings. These methods
may be used as surrogates of monetary methods and also have a predictive value. The non-
monetary methods may refer to a simple inventory of skills and capabilities of people within
an organization or to the application of some behavioural measurement technique to assess
the benefits gained from the Human resource of an organization.
(a) The skills or capability inventory is a simple listing of the education, knowledge,
experience and skills of the firm's human resources.
(b) Performance evaluation measures used in HRA include ratings, and rankings.
Ratings reflect a person's performance in relation to a set of scales. They are scores
assigned to characteristics possessed by the individual. These characteristics include skills,
judgment, knowledge, interpersonal skills, intelligence etc. Ranking is an ordinal form of
rating in which the superiors rank their subordinates on one or more dimensions,
mentioned above.
(c) Assessment of potential determines a person's capacity for promotion and
development. It usually employs a trait approach in which the traits essential for a position
are identified. The extent to which the person possesses these traits is then assessed.
(d) Attitude measurements are used to assess employees' attitudes towards their job,
pay, working conditions, etc., in order to determine their job satisfaction and dissatisfaction.
(e) Expected Realisable Value Method ,the elements of expected realisable value of
employee are measured through behavioural measures. For e.g. The productivity of an
employee can be measured by using objective indices an managerial assessment.
Psychometric tests and subjective evaluation can be use to measure the promo ability and
transferability of employees.

6. Q.What is Human Resource Information System, What is its role in Career
Planning?
*Human Resource Information System(HRIS): - HRIS is a systematic way of
storing data and information for each individual employee to add planning, decision making
and submitting oh returns and reports to the external agencies.
In today’s era of information
technologies, information is power. It is the life-blood of an organisation. There has been an
increasing realisation that success of an organisation in a complex and changing business
environment hinges, to a large extent on the effective management of its human resources.
The effectiveness of human resource management largely depends upon the quality of
information held by it.
A Human Resource Management S��� stem (HRMS) or Human Resource
Information System (HRIS), refers to the systems and processes at the intersection between
human resource management (HRM) and information technology. It merges HRM as a
discipline and in particular its basic HR activities and processes
with the information technology field, whereas the programming of data processing systems
evolved into standardized routines and packages of enterprise resource planning (ERP)
software. On the whole, these ERP systems have their origin on software that integrates
information from different applications into one universal database. The linkage of its
financial and human resource modules through one database is the most important
distinction to the individually and proprietary developed predecessors, which makes this
software application both rigid and flexible.
Areas are:-
(1) Personal Profile (Name, Age, Gender, department)
(2) Career Profile (Qualification, Experience)
(3) Skills Profiles (Analytical, Technical, Managerial)
(4) Department Profile (Organisation level)
HRIS PROCESS:-
Feedback
Transformation
Input Output
Process
Questionnaire to be Feedback Get the final data
used for evaluate the skills

7. *Its role In Career Planning:-The main role of maintaining HRIS system is to
gather, classify, process, record and disseminates the information required for efficient and
effective management of career planning in the organisation. The various role of in an
organisation can be listed as follow:
(1) Career Planning: By providing necessary information such as which employees have
been earmarked for which positions, HRIS facilitates positional advancement of employees.
In other words,HRIS helps in planning for succession.
(2) Recruitment: Recruitment forms the most essentials function of HRN.HRIS helps in
the recruitment process in a big way by recording the details of activities involved in
employee recruitment. These may include cost and method of recruitment and time taken
to fill the positions of level wise.
(3) Man power planning: HRIS is used for man power planning also. it keeps
information of organisational requirements in terms of positions HRIS connects employees
to the require positions in the organisations. It is also used to identifies vacancies and
establish employees thereon.
(4) Medical History: The HRIS is also used to maintain occupational health data required
for industrial safety purposes, accident monitoring and so on.
(5) Skill Inventory: Recording employee skills and monitoring a skill data base is yet
another use of the HRIS.Such a skill record helps identify employees with the necessary skill
for certain positions a jobs in an organisations.