Behavioral Accounting

DEFINITION of 'Behavioral Accounting'

An accounting method which takes into account key decision makers as part of the value of a company. Behavioral accounting was developed to make the behavioral effects transparent to potential and current stakeholders. This is done to better understand the impact that business processes, opinions, and human variables have on the value of the overall corporation, now and in the future.

Also known as "human resource accounting".

BREAKING DOWN 'Behavioral Accounting'

In behavioral accounting the valuation of a company goes beyond the numbers and attempts to include the human factor.

Take the example of two companies, company ABC and DEF, which have identical financial statements. If ABC has a more experienced workforce, and stronger management than DEF then ABC should be worth more. Behavioral accounting attempts to measure and record this aspect of a business. Behavioral accounting is of particular interest to scholars due to the influence of time constraints, accountability, judgments, and motivations individual decision makers have.

RELATED TERMS
  1. Account Analysis

    1. In cost accounting, this is a way for an accountant to analyze ...
  2. Organizational Behavior - OB

    Organizational Behavior (OB) is the study of the way people interact ...
  3. Regret Avoidance

    A theory of investor behavior that attempts to explain why investors ...
  4. Certified Management Accountant ...

    An accounting designation whose holder has formally demonstrated ...
  5. Linked Savings Account

    Any type of bank savings account that is linked by account number ...
  6. Money Market Account

    An interest-bearing account that typically pays a higher interest ...
Related Articles
  1. Active Trading Fundamentals

    An Introduction To Behavioral Finance

    Curious about how emotions and biases affect the market? Find some useful insight here.
  2. Investing Basics

    4 Behavioral Biases And How To Avoid Them

    Here are four common common behavioral biases for traders and how to minimize their effects on your portoflio.
  3. Active Trading Fundamentals

    Behavioral Finance

    Learn the science behind irrational decision making and how you can avoid it.
  4. Investing Basics

    8 Common Biases That Impact Investment Decisions

    Behavioral biases hit us all as investors and can vary depending upon our investor personality type.
  5. Investing

    Bad Investor Behavior: Overemphasizing Experience

    Behavioral finance researchers have discovered that our personal experiences disproportionately impact our investing behavior. Nelli examines the evidence and implications of this bad investing ...
  6. Investing

    The Science of Making Better Investment Decisions

    Neuroeconomics attempts to bridge neuroscience, cognitive psychology and economics in order to understand the mechanisms underlying economic decision making.
  7. Executive Compensation

    Accountant: Job Description & Average Salary

    Discover what the job description of an accountant entails, along with education and training, salary and skills necessary for success.
  8. Investing Basics

    A Day In The Life Of An Accountant

    An analysis of the accountant profession, who becomes an accountant, what they do, where they work, and salary ranges.
  9. Credit & Loans

    What is an Account Balance?

    An account balance represents the total amount of money in a financial account at any given moment.
  10. Investing Basics

    Human Capital, An Important Asset For Portfolio Diversification

    An investor’s total wealth consists of two parts – financial capital and human capital. The latter should not be overlooked in investment strategies and portfolio management.
RELATED FAQS
  1. What is the difference between accounting and economics?

    Discover the difference between accounting and economics by comparing and contrasting the financial discipline of accounting ... Read Answer >>
  2. How does behavioral economics treat risk aversion?

    Learn about the relationship between decision-making and risk, as described by one of the foundational theories in behavioral ... Read Answer >>
  3. What are the objectives of financial accounting?

    Learn about the principle objectives of financial accounting, including the furnishing of the financial statements for those ... Read Answer >>
  4. What is the difference between the current account and the capital account?

    Learn how to differentiate between the capital account and the current account, the two components of the balance of payments ... Read Answer >>
  5. How does the balance of trade impact a nation's capital accounts balance?

    Find out how a country's capital account is related to the current account, the financial account, and the overall balance ... Read Answer >>
  6. At what stage of business should human resources planning occur?

    See why strategic human resources planning is an ongoing process, and learn how an HR department plays a crucial role in ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center