The authors x-rayed the relationship between human resource accounting (HRA) to financial performance of banks in Nigeria. It is believed that a well-developed system of HRA could contribute significantly to internal decisions by management and external decisions by investors. The authors adopted the survey research design. An instrument was designed using the 5-point Likert scales. The instrument (questionnaire) has 17 items. A total of 22 samples were drawn from the target population using the simple random sampling technique. Out of the 22 questionnaires administered, 21 were returned upon which the analysis was based. This represents 96% response rate.

The Chi- square statistical technique was used to test the hypothesis at 5% alpha level. It was found that HRA is a major factor in the financial performance of banks. It is also empirically verified that HRA value in the balance sheet of organization does help the organization make more rational decisions. HRA should be made a necessary element of financial reporting. The authors recommended the necessity of recognizing human resources asset in the financial statement of financial position and using current cost to measure it; human resource cost should be reported in asset accounts rather than as expenses; effort to improve HRA should focus on the value of quality management, since it is positively related to the future operating performance of the banking industry.

This study concludes that a well-developed system of HRA could contribute significantly to internal decisions by management and external decisions by investors Fajana (2002).


Content                                            Page

Title page    -    -    -    -    -    -    -    -    -    -    i

Approval    -    -    -    -    -    -    -    -    -    -    ii

Dedication    -    -    -    -    -    -    -    -    -    -    iii

Acknowledgement    -    -    -    -    -    -    -    -    -    iv

Abstract    -    -    -    -    -    -    -    -    -    -    v


1.1  Background of the Study

1.2         Statement of the Problem

1.3         Objectives of the Study

1.4         Research Questions

1.5         Research Hypothesis

1.6         Significance of the Study

1.7         Scope and Limitations of the Study

1.8         Definition of Terms


2.0              Introduction

2.1              Conceptual Framework

2.1.1           Concept of Human Resource Accounting        Reasons for Human Resource Accounting        Objectives of Human Resource Accounting in the Banking Industry        Limitations of Human Resource Accounting in the Banking Industry        Approaches to Human Resource Accounting in Organization        Arguments for Human Resource Accounting        Arguments against Human Resource Accounting        Perception of Human Resource Accounting        Disclosure Requirement of Human Resource Accounting        Information Management in Human Resource Accounting

2.2              Literature Review and Theoretical Framework

2.2.1           Services        Definition of Service and Service Quality        Human Resource Accounting and Organizational Performance        Performance Measurement

2.3             Empirical Framework

2.3.1          The Importance of Operational Efficiency Studies

2.3.2          Inputs and Outputs in Bank Production

2.3.3          IT, Productivity, Efficiency and Performance       IT       Productivity       Efficiency       Performance

2.3.4          Impact of IT on Performance of Organization

2.3.5          Information and Communication Technologies and Their Use in Banks

2.3.6          Impact of ICT on Banks Operations and Performance

2.4             Conceptual Model


3.0            Introduction

3.1           Research Design

3.2           Population of the Study

3.3           Sample and Sampling Techniques

3.4           Data Collection Method

3.5           Research Instrument

3.5.1        Validity of the Instrument

3.5.2        Reliability of the Instrument

3.6           Data Analysis Techniques

3.7           Limitations of Methodology

3.8           Formulation of Hypothesis


4.0             Introduction

4.1             Respondents Personal Profile

4.2             Analysis of Research Questions

4.3             Hypothesis Testing

4.4             Discussion of Findings


5.1          Summary of Findings

5.2          Conclusion

5.2.1       Limitations

5.2.2       Implications

5.3          Recommendations






The growing importance of human resources accounting is a determinant of economic success at both the macroeconomic and microeconomic levels which dictates that firms need to adjust to this new economic reality. Specifically, if human capital is a key determinant for organizational success, then investment in the training and development of employees to improve performance is a critical component of this success. This broad socioeconomic shift underscores a growing need for measuring and analyzing human capital when making managerial and financial decisions. Yet important human resource decisions involving hiring, training, compensating, productivity and other matters are often made in the absence of specific information about the different cost and benefit of these particular choices. Human resources accounting is a managerial tool that can be used to gain this valuable information by measuring the cost of recruiting, hiring, compensating and training employees. It can be used to evaluate employee training programs, increase productivity and improve managerial decision making regarding promotions, transfers, layoffs, replacement, and turnover. (Prabhakar, 1993).

The American Accounting Association’s Committee on Human Resource Accounting (1973) has defined Human Resource Accounting as “the process of identifying and measuring data about human resources and communicating this information to interested parties”. Human resource accounting, thus, not only involves measurement of all cost investment associated with the recruitment, placement, training and development of employees, and also the qualification of the economic value of the people in an organization.

The past few decades have witnessed a global transition for manufacturing to service based economies. The fundamental difference between the two lies in the very nature of their assets. In the former, the physical assets like plants, machinery, materials etc. are of utmost importance. In contrast, in the latter, knowledge and attitudes of the employees assume greater significance. For instance, in the case of an I.T firm, the value of its physical assets is negligible when compared with the value of the knowledge and skills of the personnel. Similarly, in hospitals, academic institutions, consulting firms etc. the total worth of the organization depends mainly on the skills of its employees and the services they render. (Flamholtz, 1971). Hence, the success of these organizations is contingent on the quality of their Human Resource, its knowledge, skills, competence, motivation and understanding of the organizational culture. In knowledge-driven economies, it is imperative that the humans be recognized as an integral part of the total worth of the human capital. It is necessary that some methods of quantifying the worth of the knowledge, motivation, skills and contribution of the human elements as well as that of the organization processes like recruitment, selection, training etc. which are used to build and support these human aspect is developed. Human resource accounting (HRA) denotes just this process of quantification/measurement of the Human Resource. (Flamholtz, 1999).

Human resources accounting centers on the valuation of human capital available to organizations and its recording and subsequent reporting in the financial statement of the organization. Human capital is the main factor towards achieving the organizational goals of maximizing the wealth of the owner. The economist Milton Friedman states, from the broad and general point of view, that total wealth includes all sources of income consumable services. One of such is the production capacity of human beings and accordingly, this is one form in which wealth can be held. (Karl-Erik Sveiby, 2004).

Human resource accounting facilitates effective and efficient use of human resources. Human resources along with financial and material resources, contributes to the production of goods and services in an organization. Physical and monetary resources by themselves cannot improve efficiency or contribute to an increased rate of return on investment. (Anjorin B, 1992). It is through the combined and concerted effort of people that monetary and material resources are harnessed to achieve organizations goals. (Likert R, 1971). Human resources in the business organizations cannot be over-emphasized in this modern world, as human resources therefore is the most important assets of an organization. Infact, with additional training and experience gained over a period of time, they tend to do well on the job. This fact however, is ignored when a firm’s balance sheet is prepared. All expenses relating to recruitment, training and development of employees are charged against the revenues of a particular accounting period. The expenses on human resources are fixed in nature and do not offer any immediate return.

The nature accrues to the firm over a long period i.e. as long as the employee remains with the firm as a result of human resources accounting. Hence such costs should be capitalized and amortized over the entire period so that the Balance sheet gives a true and fair view of the state of affairs of a business. (Brummet, 1983). Since human resources are capable of enlargement

over a period of time, there should be innovative investment in its people and how the value of people changes over a period of time. Human resources accounting is one of such methods which endeavour to reduce the cost, measures and improve the value of people to an organization.

The link between human resources policies and organizational performance is the use of employee surveys combined with benchmarking over the years. When employees are viewed as assets rather than simply costs, there is a positive impact on an organizational performance. A mix of financial and non-financial measures (actual versus budget, cash flow, customer satisfaction, economic value added, employee satisfaction, employee turnover, safety, sales and shareholders total return) leads to improved organizational performance.


Despite the fact, that there is a high growth rate in human resources accounting in every industry, there is scarcity of literature devoted to studying the impact of human resources accounting in the banking industry particularly in Nigeria. The literatures used have not been able to address the relationship between human resources accounting and its importance to in organizational performance. Banking industry as a heart of economic development in any country with its major resources as human resources, there is a need to study how the industry can utilize its human resources to achieve its set goals or objectives.(project topics   final year project topics )


The main objective of the study is to examine and investigate the impact of human resources accounting on the performance of banks in Nigeria. Other specific objectives are to:

1. To determine the relationship between human resources accounting and the financial performance of banks in Nigeria.

2. To determine the significant influence of human resources accounting in the banking industry.

3. To proffer solutions to the problems affecting the system of human resources accounting and the financial performance of banks in Nigeria.

4. To identify problems affecting the system of human resources accounting and financial performance of banks in Nigeria.

5. To determine effective system of human resources accounting to the financial performance of banks in Nigeria.


In the course of carrying out this research, the following questions shall be provided answers for.

Is there any relationship between human resources and the performance of banking sector? What is the effective system of human resources accounting in banking industry? What are the problems affecting the system of human resources accounting in banking industry? What is the relationship between human resources accounting and economic value of people to the banking industry in Nigeria? What are the importances of human resources accounting in the financial performance of banks in Nigeria?


During the course of study, the following research hypotheses shall be tested.

Ho: There is no relationship between human resources accounting and

                  the performance of banks.

           Hi:  There is a relationship between human resources accounting and

                   the performance of banks.

Ho: Human resources accounting is not effective in the banking


           Hi:  Human resource accounting is effective in the banking industry.

Ho: There is no problem confronting human resources accounting in

        the banking industry.

Hi:  There is problem confronting human resource accounting in

                  banking industry.

Ho: There is no relationship between human resource accounting and economic value of people to the banking industry.

Hi:  There is a relationship between human resource accounting and    economic value of people to the banking industry.

Ho:  Human resource accounting is not important to the financial

                   performance of banks in Nigeria.           

           Hi:   Human resources accounting is important to the financial

                   performance of banks in Nigeria.


At the end of this study, the banking sector will learn how to utilize its human resources to the maximum advantage. Also, the findings of this study will enable the captains of banking industry to be sensitive to the need of the human resources and also to adopt strategy to decide effective leadership in order to optimally utilize their human resources.


In this study, there is bound to be limitation to be encountered during the course of this study. These limitations need to be stated to aid the users of the research findings for effective decision making.

Limited time available to carry out the research which affects the sample signs used for the research proposal. The limited funds that affect the coverage of the area in which the research is carried out.


i. ACCOUNTING: It is the systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information.

ii. RESOURCES: Something to be used to help achieve an aim.

iii. ORGANISATION: An organized group with a particular purpose.

iv. AMORTIZATION: The gradual payment or payoff of debt.

v. DEPRECIATION: Reduction in value or wear and tear of an asset over time.

vi. COMMUNICATION: A means of sending or passing information.

vii. INVESTMENT: The act of using money or spending money or effort In order to earn a profit or achieve a result.

viii. VERSATILE: Been able to do or be used for many different things.

ix. STRATEGY: A plan designed to achieve a long term aim.

x. EFFICIENCY: Working productively with no waste of money or effort.

xi. WEALTH: A large amount of money and valuable possession or the state of being rich.

xii. MOTIVATION: A state of being stimulated or interested in.

xiii. POTENTIAL: Capable of becoming or developing into something.

xiv. PRODUCTIVITY: The efficiency with which things are produced.

xv. HUMAN CAPITAL: The set of skills which an employee acquires on the job through training and experience which increases his value in the market place.



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