DEFINITION of 'Behavioral Accounting'

Behavioral accounting takes into account key decision makers as part of the value of a company and also examines how accounting practices and processes affect the behavior and processes of personnel working in a company. Behavioral accounting was developed to make the behavioral effects of accounting practices 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. 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.

Behavioral Accounting Example

Take the example of two companies, company ABC Corporation and DEF Inc., which have identical financial statements. If ABC has a more experienced workforce and stronger management than DEF, then ABC should be worth more.

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