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Amit Kumar Sharma, Lovely Professional University Unit 6: Human Resource Accounting

Unit 6: Human Resource Accounting Notes

CONTENTS
Objectives
Introduction
6.1 Meaning of HRA
6.2 Nature of HRA
6.3 Scope of HRA
6.4 HRA in India

6.5 Summary
6.6 Keywords
6.7 Review Questions
6.8 Further Readings

Objectives

After studying this unit, you will be able to:
Explain the meaning of HRA
Describe the nature of HRA

Identify the scope of HRA
Introduction

The past few decades have witnessed a global transition from manufacturing to service-based
economies. The fundamental difference between the two lies in the very nature of their assets. In
the former, physical assets like plant, machinery, material, etc., are of utmost importance. In
contrast, in the latter, knowledge and attitudes of the employees assume greater significance.
For instance, in the case of an IT firm, the value of its physical assets is negligible when compared
with the value of the knowledge and skills of its personnel. Similarly, in hospitals, academic
institutions, consulting firms, etc., the total worth of the organisation depends mainly on the
skills of its employees and the services they render. Therefore, the success of these organizations
is contingent on the quality of their human resource – their knowledge, skills, competence,
motivation and understanding of the organisational culture.

In knowledge-driven economies therefore, it is imperative that the humans be recognised as an
integral part of the total worth of an organisation. However, in order to estimate and project the
worth of human capital, it is necessary that some method of quantifying the worth of the
knowledge, motivation, skills, and contribution of the human element as well as that of the
organisational processes, like recruitment, selection, training, etc., which are used to build and
support these human aspects, is developed.

!
Caution Human Resource Accounting (HRA) denotes the process of quantification/
measurement of human resources.

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