MCQs on Methods of Human Resource Accounting

Dr. Toran Lal Verma

These MCQs are helpful in understanding the Methods of Human Resource Accounting. Solve these MCQs carefully and check your knowledge

1. Which method of Human Resource Accounting states that only scarce people should comprise the value of human resources?

  1. Replacement Cost Method
  2. Historical Cost Method
  3. Opportunity Cost Method
  4. Economic Value Method
3. Opportunity Cost Method

The Opportunity Cost Method values human resources on the basis of the economic concept of opportunity cost. The opportunity cost is linked with scarcity. A human resource asset has a value only when it is scarce i.e. its employment in one division is possible and not in another division. “The investment centre managers will bid for the scarce employees they need to recruit.

2. The Lev and Schwartz model of Human resource accounting was developed in the year

  1. 1970
  2. 1971
  3. 1972
  4. 1973
2. 1971

The Lev and Schwartz model of Human resource accounting was developed in the year 1971 and it involves determining the value of human resources according to the present value of estimated future earnings discounted by the Cost of Capital.

3. Which model of Human resource accounting is an extension of Lev and Schwartz model and considers the movement of an employee from one role to another in his career

  1. Eric Flamholtz Model
  2. Likerts Model
  3. Giles and Robinson’s Model
  4. Morse Net Benefit Model
1. Eric Flamholtz Model

Eric Flamholtz Model is an extension of the Lev and Schwartz model since it considers the possibility of an employee’s movement from one job position to another job position during his career or leaving the firm due to death or retirement.

4. Which model of Human Resource Accounting suggests that the valuation of human resources should be made in the same way as other business assets on a going concern basis?

  1. Morse Net Benefit Model
  2. Eric Flamholtz Model
  3. Hekimian and Jone’s
  4. Giles and Robinson’s Model
4. Giles and Robinson’s Model

Giles and Robinson’s Model, also known as Human Asset Multiplier method uggests that the valuation of human resources should be made in the same way as other business assets on a going concern basis

5. The Historical Cost Approach of Human Resource Accounting is given by

  1. Brummet, Flamholtz and Pyle
  2. Giles and Robinson
  3. Hekimian and Jones
  4. Roger H. Hermanson
1. Brummet, Flamholtz and Pyle

Historical cost approach was developed by Brummet, Flamholtz and Pyle. Under this method, the amount spent on the recruitment and development of employees is capitalised and amortised over the period for which the benefits are expected to flow to the organisation.

6. Replacement Cast Approach of Human Resource Accounting suggests that

  1. The certainty with which the net benefits in the future will accrue should also be taken into account while determining the value of human resources.
  2. The cost of replacing employees is used as the measure of company’s human resources. 
  3. Employees not considered ‘scarce’ are not included in the human asset base of the organisation.
  4.  The actual cost incurred on recruiting, selecting, training, placing and developing the human resources of an enterprise are capitalized and written off over the expected useful life of human resources. 

2. The cost of replacing employees is used as the measure of company’s human resources. 

According to this model, the cost of replacing employees is used as the measure of company’s human resources. The human resources of a company are to be valued on the assumption as to what it will cost the concern if existing human resources are required to be replaced.

7. Certainty Equivalent Net Benefits model of Human Resource Accounting is given by

  1. M. Scott Myers
  2. Pekin Organ
  3. Vincent S. Flowers
  4. R. Lee Brummet
2. Pekin Organ  

Pekin Ogan gave the Certainty Equivalent Net Benefits model in the year 1976. According to this model, the certainty with which the net benefits in the future will accrue should also be taken into account while determining the value of human resources. Ogan considers both cost and benefit aspects of the value of human resources to an organisation.

8. Who suggested the ‘adjusted discounted future wages model’ of Human Resource Accounting ?

  1. James S Hekimian and Curtis H. Jones
  2. M. Scott Myers and Vincent S. Flowers
  3. Roger H. Hermanson
  4. Baruch Lev and Aba Schwartz
3. Roger H. Hermanson  

Hermanson has suggested the ‘adjusted discounted future wages model whereby the discounting of future compensations with an adjustment is made with the use of ‘efficiency ratio’ to determine the value of an individual.

9. Hekiaman and Jones competitive bidding model is also known as

  1. Opportunity Cost Method
  2. Replacement Cost Method
  3. Historical Cost Method
  4. Economic Value Method
1. Opportunity Cost Method  

Hekimian and Jones competitive bidding model suggests for competitive bidding process of the scarce employees in an organisation.

10. Which of the following is wrongly matched

  1. Replacement Cost Method – Rensis Likert and Eric G. Flamholtz.
  2. Historical Cost Method – Brummet, Flamholtz and Pyle
  3. Opportunity Cost Method – Hekiaman and Jones
  4. Economic Value Method – Lev and Schwartz
All are correctly matched.  

11. Which of the following is wrongly matched

  1. Human Asset Multiplier Method – Giles and Robinson
  2. Un-purchased Goodwill Method – Roger H. Hermanson
  3. Stochastic Rewards Valuation Model – N. Dasgupta
  4. Aggregate Payment Approach – S K Chakraborty
3. Stochastic Rewards Valuation Model – N. Dasgupta  

12. The first Indian professor to suggest a model for valuation of human resources of an organisation is

  1. Prof. R. Pandagre
  2. Prof S.K Chakraborty
  3. Prof. T.L. Verma
  4. Prof. Vasanthi Srinivasan
2. Prof S.K Chakraborty  

S K Chakraborty (1976) is the first Indian to suggest a model for the value of Human resources of an organization. According to his Aggregate Payment model, the group of employees has to be assessed rather than individuals in the valuation of human resources

13. Fixing the value of an employee depending upon his productivity, promotability, transferability and retainability is the core of the

  1. Certainty equivalent model
  2. Human asset multiplier model
  3. Present value of future earnings model
  4. Stochastic Reward Valuation model
4. Stochastic Reward Valuation model

The Flamholtz’s stochastic rewards valuation model identifies the major variables which determine the value of an individual to the organisation. The model advocates that a person generates value for an organisation as he occupies and plays different roles and renders services to the organisation.

14. When the cost incurred on recruiting, training and developing the employees is considered for determining the value of employees, it is called

  1. The replacement cost approach
  2. The historical cost approach
  3. The opportunity cost approach
  4. None of the above
2. The historical cost approach

In historical cost approach approach, actual cost incurred on recruiting, hiring, training and development the human resources of the organisation are capitalised and amortised over the expected useful life of the human resources. Thus a proper recording of the expenditure made on hiring, selecting, training and developing the employees is maintained and a proportion of it is written off to the income of the next few years during which human resources will provide service.

Major Readings

www.yourarticlelibrary.com

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whatishumanresource.com

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www.iedunote.com

www.toppers4u.com

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