Behavioral Accounting

AAA

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".

INVESTOPEDIA EXPLAINS '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. Rational Choice Theory

    An economic principle that assumes that individuals always make ...
  2. Learning Curve

    A concept that describes how new skills or knowledge can be quickly ...
  3. Accounting Method

    The method by which income and expenses are reported for taxation ...
  4. Efficient Market Hypothesis - EMH

    An investment theory that states it is impossible to "beat the ...
  5. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  6. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
Related Articles
  1. What Is Market Efficiency?
    Active Trading

    What Is Market Efficiency?

  2. An Introduction To Behavioral Finance
    Active Trading Fundamentals

    An Introduction To Behavioral Finance

  3. A Look At Accounting Careers
    Personal Finance

    A Look At Accounting Careers

  4. Leading Indicators Of Behavioral Finance
    Active Trading Fundamentals

    Leading Indicators Of Behavioral Finance

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center