HUMAN RESOURCE ACCOUNTING PARADOX: BALANCING INDIVIDUAL AND ORGANIZATIONAL INTEREST

Abstract

Organisations often face the dilemma of accounting for human resource as an asset and at the same time a cost centre. This creates a challenge to financial statement reporting. This paper explores the fundamental paradox inherent in Human Resource Accounting (HRA), where human capital is simultaneously treated as both an asset and an expense in organisational accounting systems. Despite human capital being widely recognised as a critical driver of organisational success in the modern knowledge economy, current accounting practices struggle to adequately capture and report its true value. This conceptual analysis examines the theoretical foundations, practical implications, and potential solutions to this accounting dichotomy that has significant implications for organisational decision-making and stakeholder relationships. Through a review of literature and theoretical frameworks, this study identifies challenges in human capital valuation including limitations of traditional accounting principles, intangible asset measurement complexities, and human capital's evolving nature in the digital age. The research reveals that conventional accounting treatments may undervalue organizational investments in human capital development, potentially leading to suboptimal resource allocation. The paper proposes alternative frameworks for human capital accounting that better reflect the dual nature of human resources while maintaining compliance with accounting standards. It also explores how emerging technologies and data analytics could address the HRA paradox. The findings suggest resolving the HRA paradox requires a conceptual shift in how organizations measure and report human capital investments. Recommendations include developing integrated reporting approaches that capture both financial and non-financial dimensions of human capital, establishing standardized metrics for human capital valuation, and updating accounting standards to better accommodate knowledge-based assets. Organizations should adopt a balanced scorecard approach that recognizes human resources as strategic investments while acknowledging their operational cost implications.