Preparing A Balance Sheet

Preparing A Balance Sheet

Balance sheets are essential in the human resource accounting. They provide important data and information to the department. That is, they assist in the identification of the reasons as to why the return on investment is low (Bohlander, 2012). Indentify such activities will assist the human resource to understand ways of prevention or mitigating them. Individuals having interest of investing in an organisation will want guidance from the human resource manager. Balance sheets will assist in availing important details to the investor. High turnover on investment is another hurdle that human resource department has to deal with. Balance sheets give information of various departments or levels that there is such occurrence and guide involved parties on appropriate ways of containing them. Still on financial information, balance sheets will avail monetary data to the executives of the department on the potential of that department. As such, there is direct reflection of the expenditure that HRD incurs in the staffing, recruitment, developing and the training of labour (Griffin, 2001). Through balance sheets, managers will also understand the return of such expenditure to the company and its impact.

Activity: Preparing a balance sheet



Non-Current Assets Plant and equipment 25,000

Property 72,000

Motor Vehicles 15,000

Fixtures and fittings 9,000

Total Non-Current Assets 121,000

Current Assets Trade receivables 48,000

Inventories 45,000

Cash 1,500

Total Current Assets 94,500

Total Assets 215,500

Equity (Owner’s Claim) Equity at 1 October 2009 117,500

Drawings for the year to 30 September 2010 15,000

Profit for the year to 30 September 2010 18,000

Total 120,500

Non-current liabilities Long term borrowing 51,000

Current liabilities Short-term borrowing 26,000

Trade payables 18,000

Total Current and Long-term 95,000

Total Equity and liabilities 215,500

This activity of preparing a balance sheets lead to the realization of the fact managers in the HR can use them to acquire information and data on the value and the cost human resource (Talwar, 2006). It also illuminates quantum related to the acquisition of labour. An executive might also have an interest on the cost of running the department and comparing such cost with the benefits that the firm will derive from such activities (Boudreau, 2000). They will, in addition, assist an executive to manage the resource in a manner that maintains cost at lower levels while at the same time avoiding the compromise of the quantity and quality of the this resource. Such will allow the manger to improve or maintain the efficiency of this department on the entire department.

Human resource executives can use the information provided by a balance sheet to make effective and proper decisions in management (Griffin, 2001). That is maintenance, allocation, acquisition, and the development of human resources for the purposes of achieving objectives in the organisation that are cost-effective. Balance sheets also reflect the usage of human resources by management. In accordance to this, they provide important information to the manager making it easier to track the usage (Balkin, 2009). On long-term basis, managers can use financial information that a balance sheet will provide to make an analysis of the entire human labour asset. That is, they can easily make a determination of the assets in terms of if they are appreciating, conserving or depleting (Boudreau, 2000). There is also the provision of aid in the sector of developing important management principles. This assists human resource managers to make sustainable decision that will be relevant in the future.

Transfers and promotions are relevant in any organisation. Human resource manager has the responsibility of managing such activities. Making such decisions requires the availability of important information on the part of human resource department. Balance sheets provide the human resource manage with relevant information that will be critical in the making of such decisions. That is, it will give a reflection of areas that require additional human resource and levels that have excess labour. Balance sheets will also indicate areas that have low levels of training and allow the human resource manager to make recommendations to those departments to improve the skills of their personnel (Bohlander, 2012). Retrenchment issues or making the decisions of departments that will have to lay off employees is also the mandate of HRM. They can however use financial information that balance sheets provide to make evidence-based decisions.

Training of employees is expenditure to a firm. Using the balance sheets will give HRM the financial information that will reflect on the relevance of such activities (Balkin, 2009). Afterwards, HRM can make recommendation to department on whether there is good utilization of training finances awarded such departments. Such information gives executives the authority of making decisions that will steer the company in the desired direction (Noe, 2000). That is, through human resource accounting, a balance sheet allows policy-makers in the department to assess and understand the internal strengths and weaknesses of a company. Such data makes it possible for them to guide other departments in the organisation into the right direction for the benefit of the entire company (Pieper, 2000). This is an important vice especially if the company is facing unfavourable or adverse conditions at that particular moment.

In normal business practices, accounting for the human resource department is a challenge to a firm. Using balance sheets in the department will indeed be an attempt to account for the department (Pieper, 2000). As such, HR managers can use a balance sheet in the identification of investments made by the department of human resource. It also makes it easier to report such investments to the relevant parties. Balance sheets preparation will avail information of the entire system on the changes that are occurring in human resource department of any organisation. It is also important in quantifying value and the costs of employing the employees of that organisation (Weihrich, 2006). This has the meaning that it will provide human resource manager with systematic information that will enable efficient organisation of accounts in the department.

Discussions provided in this paper indicate the relevance of preparing balance sheets. Human resource managers derive lots of importance from the activity (Noe, 2000). They can understanding the investment that their firm is making and compare such investments with the compensation that the company acquires from it (Talwar, 2006). Such will allow the human resource manager to make important decisions regarding such investments and guide other departments. The long-term implication of this is that balance sheets preparation will have a direct reflection on the success of a HRM (Weihrich, 2006). It is for this reason that human resource accounting is an essential tool in any HR department. This is because the kind of information that the human resource manager acquire from the process will determine the success of that department. In addition, it will allow HRM to make evidence-based decisions.


Talwar, P. (2006). Human Resource Management. New York: Gyan Publishing.

Weihrich, H. (2006). Essentials of Management. New York; McGraw- Hill Publishers.

Pieper, R. (2000). Human Resource Management: An International Comparison. Berlin: Walter de Gruyter.

Balkin, R. L. (2009). Managing Human Resources. London: Pearson/Prentice Hall.

Boudreau, J. W. (2000).Human resource management. California: Irwin Publishers.

Noe, R. Y. (2000). Human resource management: gaining a competitive advantage. New York: McGraw Hill.

Bohlander, G. W. (2012). Managing Human Resources. Stamford: Cengage Learning.

Griffin, R. W. (2001). Human Resource Management. London: Houghston.