What is human resource accounting method?

Human resource accounting (HRA) is the process of identifying and reporting investments made in the human resources of an organization that are presently unaccounted for in the conventional accounting practice.

Measuring the value of the human resources can assist organizations in accurately documenting their assets.

It involves measuring the costs incurred by business firms and other organizations to recruit, select, hire, train and develop human assets. It also involves measuring the economic value of people to the organization.”

Human Resource Accounting (HRA) is the process of recognizing and reporting investments in an organization’s human resources that are currently unaccounted for in traditional accounting. It is a development of traditional accounting principles. Organizations can benefit from accurately documenting their assets by measuring the worth of their human resources. In other words, human resource accounting is a method of calculating the cost of recruiting, selecting, training, and developing human resources. It entails calculating the costs incurred by businesses and other organizations in recruiting, hiring, training, and developing human resources. It also entails calculating the economic value of employees to the company. Its main goal is to make efficient human resource management easier by giving knowledge on how to find, develop, keep, use, and assess people. Substituting the replacement cost approach for the historical cost method accomplishes little more than updating the valuation while adding a significant amount of subjectivity to the metric. Because an inefficient organization may incur a higher cost to replace an employee, this method may result in an upwardly biased estimate.