Accounting Principles and Human Resource Management Fundamentals

1. Nature and Scope of Accounting

Nature of Accounting

• Systematic Process: Identifying, recording, classifying, summarizing, and interpreting business transactions.
• Historical in Nature: Primarily records past events.
• Quantitative: Deals mostly with financial/monetary information.
• Dual Aspect: Based on the double-entry system (debit equals credit).
• Communication Tool: Provides information to stakeholders.

Scope of Accounting

• Financial Accounting: Recording and reporting of transactions (Profit & Loss, Balance Sheet).
• Cost Accounting: Ascertainment of cost, cost control, and decision-making.
• Management Accounting: Provides financial and non-financial information for planning and control.
• Tax Accounting: Deals with income tax, GST, and compliance.
• Auditing: Verification of accounts for reliability.

2. Budgeting and Budgetary Control

Budgeting

• A budget is a quantitative or financial plan prepared for a specific future period.
• It aids in planning, coordination, and resource allocation.

Types of Budgets:

• Fixed Budget
• Flexible Budget
• Cash Budget
• Sales Budget
• Production Budget

Budgetary Control

• Process of comparing actual performance with budgeted figures and taking corrective actions.
• Ensures effective utilization of resources.

Steps in Budgetary Control:

1. Establishing budgets.
2. Recording actual results.
3. Comparing actual with budgeted figures.
4. Analyzing variances.
5. Taking corrective measures.

Formula (Variance):

Budget Variance = Actual Performance − Budgeted Performance

3. Standard Costing

Meaning

• A technique of cost accounting where predetermined costs (standards) are compared with actual costs to measure efficiency.
• Helps in cost control, decision-making, and performance evaluation.

Steps in Standard Costing

1. Setting standard costs (for material, labour, overheads).
2. Recording actual costs.
3. Analyzing differences (variances).
4. Reporting to management.

4. Variance Analysis (with Formulas)

Variance = Difference between Standard Cost and Actual Cost. It helps in identifying areas of inefficiency.

(A) Material Variances

• Material Cost Variance (MCV):

MCV = (SP × SQ) − (AP × AQ)

Where, SP = Standard Price, SQ = Standard Quantity, AP = Actual Price, AQ = Actual Quantity

• Material Price Variance (MPV):

MPV = (SP − AP) × AQ

• Material Usage Variance (MUV):

MUV = (SQ − AQ) × SP

(B) Labour Variances

• Labour Cost Variance (LCV):

LCV = (SR × SH) − (AR × AH)

Where, SR = Standard Rate, SH = Standard Hours, AR = Actual Rate, AH = Actual Hours

• Labour Rate Variance (LRV):

LRV = (SR − AR) × AH

• Labour Efficiency Variance (LEV):

LEV = (SH − AH) × SR

(C) Overhead Variances

• Variable Overhead Expenditure Variance:

(Standard Rate − Actual Rate) × Actual Hours

• Variable Overhead Efficiency Variance:

(Standard Hours − Actual Hours) × Standard Rate

• Fixed Overhead Expenditure Variance:

Budgeted Overheads − Actual Overheads

• Fixed Overhead Volume Variance:

Standard Rate × (Standard Hours − Budgeted Hours)

Unit I – Human Resource Management (HRM) – Introduction

1. Introduction to HRM

• Definition: HRM is the process of recruiting, developing, motivating, and retaining employees to achieve organizational goals.
• Nature:
  • People-oriented
  • Continuous process
  • Both science (principles) and art (application)
  • Integral to management
• Objectives:
  1. To ensure the right people are available for the right job.
  2. To maximize employee performance.
  3. To create job satisfaction and growth opportunities.
  4. To maintain good employer–employee relations.

2. Human Resource Planning (HRP)

• Meaning: Process of forecasting an organization’s future human resource needs and planning how to meet them.
• Steps:
  1. Assess current manpower.
  2. Forecast future demand.
  3. Estimate manpower supply.
  4. Identify gaps.
  5. Develop strategies (recruitment, training, redeployment).
• Importance: Prevents manpower shortages/surpluses, reduces costs, and supports growth.

3. Recruitment

• Definition: Process of attracting potential candidates to fill vacancies.
• Sources:
  • Internal: Promotion, transfers, internal job postings.
  • External: Advertisements, employment exchanges, campus placements, online portals.

4. Selection

• Definition: Choosing the most suitable candidate from applicants.
• Steps:
  1. Application screening
  2. Tests (aptitude, skills, personality)
  3. Interviews
  4. Medical examination
  5. Reference checks
  6. Final offer/appointment

Unit II – Training and Development

1. Training and Development

• Training: Short-term process of developing specific skills in employees.
• Development: Long-term educational process aimed at overall growth and future roles.

2. Methods of Training

• On-the-Job Training (OJT): Coaching, job rotation, apprenticeship.
• Off-the-Job Training: Classroom lectures, role play, simulation, case studies, workshops.

3. Job Analysis

• Meaning: Systematic study of a job to understand its duties, responsibilities, and required skills.
• Outcomes:
  • Job Description: Duties, responsibilities, working conditions.
  • Job Specification: Qualifications, skills, experience required.

4. Job Evaluation

• Meaning: Process of determining the relative worth of jobs in an organization.
• Methods:
  • Ranking method
  • Point rating method
  • Factor comparison method
• Purpose: To ensure a fair pay structure.

5. Career Planning

• Definition: Process of matching individual career goals with organizational opportunities.
• Steps:
  1. Self-assessment (interests, strengths).
  2. Setting career objectives.
  3. Identifying career paths.
  4. Training & development programs.
  5. Continuous review and counseling.

Unit III – Performance and Employee Management

1. Performance Management

• Meaning: Continuous process of identifying, measuring, and developing employee performance.
• Components:
  • Goal setting
  • Performance appraisal (360° feedback, rating scales, MBO – Management by Objectives)
  • Feedback and coaching
  • Rewards and recognition

2. Payroll and Compensation Management

• Payroll: Process of preparing and disbursing salaries, wages, bonuses, and deductions (PF, ESI, tax).
• Compensation Management: Designing a fair remuneration system including:
  • Direct pay (wages, salaries)
  • Indirect pay (perks, allowances, benefits)
  • Incentives & bonuses

3. Employee Retention

• Meaning: Strategies to keep talented employees within the organization.
• Methods:
  • Competitive salaries
  • Career development opportunities
  • Positive work culture
  • Recognition and rewards
  • Work–life balance

4. Employee Health and Safety

• Need: To reduce accidents, ensure a safe working environment, and comply with labor laws.
• Measures: Safety training, protective equipment, workplace ergonomics, emergency protocols.

5. Mental Health and Wellbeing

• Importance: Stress, burnout, and mental illness reduce productivity.
• Strategies:
  • Counseling services
  • Stress management workshops
  • Flexible work policies
  • Promoting healthy work-life balance
  • Creating a supportive organizational culture

Quick Summary (Brief Explanation in Points)

• HRM: People management function → planning, hiring, developing, compensating, retaining.
• HR Planning: Forecast future workforce needs.
• Recruitment & Selection: Attract and choose the right candidates.
• Training & Development: Improve skills and prepare for future roles.
• Job Analysis & Evaluation: Define job roles and determine fair pay.
• Career Planning: Align employee aspirations with organizational opportunities.
• Performance Management: Monitor and enhance employee performance.
• Payroll & Compensation: Fair pay + benefits.
• Employee Retention: Keep talent through growth & culture.
• Health & Safety: Ensure physical and mental wellbeing of the workforce.