What are the methods of HRA (Human Resource Accounting)?

Methods of Human Resource Accounting

  • Capitalization of Historical Costs Method.
  • Replacement Cost Method.
  • Opportunity Cost Method.
  • Economic Value Method.
  • Standard Cost.
  • Cost-Benefit Method.
  • Noin-Monetary Methods for HRA(Human Resource Accounting).

Human Resource costs (also known as Human Resource costing) are a crucial component of HR accounting. The human resource department has long been thought of as a cost center or fee burner. As a result, there is always a strong focus on cost reduction within HR. This is where the concept of Human Resource Costing comes into play.

Methods of Human Resource Accounting:

Capitalization of Historical Costs Method - The cost incurred in staffing, placing, and training are capitalized and written off through the useful life of the human resource.

Replacement Cost Method - The replacement cost method arrives at the cost of the asset considering the present-day cost of the asset.

Opportunity Cost Method - Selecting one assigns value to the employee on what the organization might be willing to pay them.

Economic Value Method - It calculates the cash inflow by an employee throughout their service period in the organization.

Standard Cost Method - It determines the total cost incurred in hiring, training and development of the particular employee.

Cost-Benefit Method - A cost-benefit analysis quantifies potential returns against the cost the organization incurs towards the employee.

Non-Monetary Method - Determining the behavioral changes that an employee undergoes throughout their tenure.