How to Place Human Resources into the Balance Sheet?

Progress in human resources accounting must continue to find a clear constructive definition of terms pertaining to human capital and human assets. The present paper is comprised of considerations leading to the proposal of more general definitions of capital that involve human capital. As a complement to Fisher's concept of capital measurement, the present definition explains capital based on the capitalization process. Capitalization should be viewed as an essential attribute of capital. Human resources accounting (HRA) can benefit from improvements in the definition of certain terms related to human capital. Of particular importance is a proposal of a more general definition of capital. The definition leads to an alternative measure,which is more useful in the HRA field than the Lev‐Schwartz model. The proposed measure compliments Fisher's concept of capital measurement and utilizes a compound interest approach. Capital is perceived as a value of economic means capitalized in physical and human resources. The rate of capitalization is determined through natural and social conditions of the environment. The mode of capital measurement results from the above definitions. Moreover, the measure of human capital appears as a generalization of the historical cost concept. The valuation model of human capital involves capitalized costs of living, costs of professional education and value of experience measured by a slightly modified learning curve. Having human capital redefined and measured in these terms, we can introduce human resources into the balance sheet using a set of relevant journal entries.