An enterprise possesses two types of resources, (i.e., assets) - a group of human resources and a group of physical resources such as plant and machinery, land and building, furniture, etc. In fact, human resource is the most important factor in securing stability, development, and profitability of an enterprise, either in the short run or in the long run. The traditional accounting system provides information only regarding physical resources. The human resources are not reflected in the financial statements as assets in this system. Accountants have not yet been able to evolve a `generally accepted system' as regards the representation of the `value' of these resources through financial statements. Such a limitation of the traditional accounting system has led to the development of a new field of accounting, which is known as `Human Resource Accounting' (HRA). With the accelerated growth in science and technology, the value of human capital is gradually increasing. Hence, it is essential for a company to reflect the investment in human resources.

Accounting is the language of business. It is the process of identifying, measuring and communicating economic information to facilitate informed judgments and decisions by users of the information. Accounting practices existed even from the time of King Chandragupta. The modern system of accounting is based on the principles of Double Entry System of Accounting. However in recent years, remarkable changes have taken place in the accounting field due to the growth of diversified corporate bodies, mergers, and globalization. Accounting can be classified into Financial Accounting, Cost Accounting and Management Accounting. Certain rules, procedures, concepts, and conventions have been developed to arrive at a consensus view, which is called as Generally Accepted Accounting Principles (GAAP). However, in the recent past, a number of developments, like Value Added Statement, Human Resource Accounting, Corporate Social Reporting, Accounting for Price Level Changes, Accounting for Non-profit Organizations, etc., have taken place. Human Resource Accounting (HRA) is one of the vital thrust areas, which is recognized by accountants all over the world.

Human resource is one the most important factors of production which increases the productivity without any additional cost, by proper treatment and direction. Human resources tend to be ignored, but these are the most valuable assets like any other like plant, patents, goodwill, etc. Particulars relating to human resources are to be added as assets and should be included in the Accounting Report. Under the existing practices, expenses for human resources are treated as revenue expenditure. Instead, these should be considered as investments and amortized over a reasonable period.

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