Methods of HRA - Management Duniya

Methods of HRA

Methods of HRA:

There are two major aspects of HRA

1. HR Cost accounting (HRCA)


2. HR Value accounting (HRVA)

1. HR Cost Accounting: HRCA may be defined as the measurement & reporting of the cost incurred to acquire & develop people as organisational resources. It deals with accounting for investments made by an organisation in acquisition & developing HR as well as the replacement cost of people presently employed.

It includes: 1. Historical Cost Approach 2. Replacement Cost Approach

Historical Cost Approach: Historical Cost Approach developed by “R. Lee Brummet, Eric G. Flamholtz and William C. Pyle. , according to this approach “ the actual cost incurred on recruiting, selecting, training, placing & developing the HR’s of an enterprise capitalised & written off over the expected useful life of HR’s.

Merits:

1. This method is simple to understand & easy to work out


2. The traditional account concept matching cost with revenue is flowed in this method.


3. It can help a firm in finding out a return on HR’s investment.

Limitations:

1. It is difficult to estimate the no.of years an employee will be with the firm.


2. It is difficult to determine the no. of years over which the effect of investment on employees will be realised.


3. It is also difficult to fix rate of amortisation.


4. The value of an asset decreases with amortisation.

Source: Books & Notes

Tags: Account, accounting, Cost, Expenditure, expenses, finance, goods, HRA, HUMAN RESOURCE ACCOUNTING, income, Loss, Methods of HRA, Profit, Profit and Loss, Profit and Loss account, Resource, revenue, sales
By: Management Duniya