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. Behavioral Funds

    Definition of behavioral funds.
  2. Behaviorist

    1. One who accepts or assumes the theory of behaviorism (behavioral ...
  3. Chart Of Accounts

    A listing of each account a company owns, along with the account ...
  4. Behavioral Economics

    The study of psychology as it relates to the economic decision ...
  5. Account Analysis

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

    Organizational Behavior (OB) is the study of the way people interact ...
Related Articles
  1. ETFs & Mutual Funds

    A Quick Guide On Behavioral Funds

    Investopedia explores the working of behavioral funds, their benefits and risks, and an analysis of their past returns.
  2. Trading

    Understanding Investor Behavior

    Discover how some strange human tendencies can play out in the market, posing the question: are we really rational?
  3. Entrepreneurship & Small Business

    7 Ways Your Emotions Skew Your Business Decisions

    Important decisions such as making a key investment, increasing production or expanding into new lines are all clouded by human emotion. Can you stay cool under pressure?
  4. Trading

    An Introduction To Consensus Indicators

    Learn how the herd is almost always wrong, or at least late in jumping on the bandwagon.
  5. Trading

    Behavioral Finance

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

    8 Common Biases That Impact Investment Decisions

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

    Behavioral Finance: Background

    By Albert PhungBefore we go over the specific concepts behind behavioral finance, let's take a more general look at this branch of finance. In this section, we'll examine how it compares to conventional ...
  8. Managing Wealth

    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.
  9. Managing Wealth

    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.
  10. Trading

    Modern Portfolio Theory vs. Behavioral Finance

    Modern portfolio theory and behavioral finance represent differing schools of thought that attempt to explain investor behavior. Perhaps the easiest way to think about their arguments and positions ...
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 economics study human action and behavior?

    Find out why economics can be considered a deductive social science, like sociology, and how human action and behavior informs ... Read Answer >>
  3. What are the main objectives of cost accounting?

    Learn about the main benefits of cost accounting systems, why they are different from financial accounting and why they are ... Read Answer >>
  4. How is market to market accounting different than historical cost accounting?

    Learn about historical cost accounting and mark to market accounting, the difference between and the limitations of the two ... Read Answer >>
  5. What does it mean when the shares in my account have been liquidated?

    An account liquidation occurs when the holdings of an account are sold off by the firm in which the account was created. ... Read Answer >>
  6. How does financial accounting help decision making?

    Read a brief overview of some areas where financial accounting helps in decision making for investors, lending institutions ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center