Research into Human Research accounting began in the 1960’s by Rensis Likert. It supported long term planning on diverse qualitative human resource variables yielding superior benefits in long run. Human resource Accounting is the outcome of numerous research studies conducted in the field of accounting and finance. Human resource as an asset if positioned & nurtured in the right direction may realize its full potential. Lately, the Behavioral scientists criticized the conventional accounting practice of valuing human resource along with physical resources and stressed on the concept of assigning monetary value to human resource of the organization. They advocated that any expenses incurred on the development of human resources should be treated as capital expenditure as in the long run it gives benefits which can be measured in monetary terms.

Eric Falmholtz divided the development of Human Resource Accounting into five stages, which can be summed up as follows:-

First Stage (1960 – 66) – This symbolizes the beginning of Human Resource Accounting where the focus was to derive the concepts of Human Resource Accounting from other studies like economics etc.

Second Stage – (1966 – 71) – The objective here was to assess some models that would cover both costs models & monetary & non – monetary value of Human Resource .

Third Stag - (1971 – 76) – Here noticeable significance in the field of Human Resource Accounting grew leading to number of researches in the field. The focal point was the application of Human Resource Accounting in business organizations.

Fourth Stage - (1976 – 80) – This period saw the collapse of the concept of Human Resource Accounting as the organizations were not prepared to invest time , energy and most importantly the funds needed to research further deep into the concepts of Human Resource Accounting.

Fifth Stage - (1980 Onwards) – The explosion of service economies in developed countries brought about a renewal of interest in Human Resource Accounting. And further in mid 90’s the application of Human Resource Accounting to business management gained greater impetus.