National Accounting or National Accounting System ( NAS ) is the implementation of complete and consistent accounting techniques to measure the economic activity of a nation . These include elaborate built-in measures that rely on double-entry accounting . By design, this type of accounting makes the sum of both sides of the account equal, even though they each measure different characteristics, for example production and income from it. As a method , the subject is called national accounting or, more commonly, social accounting . [1] As otherwise stated, the national account systemThose systems can be separated from the associated economic data . National accounts are based on economic concepts, sharing many common principles with business accounting. [3] A conceptual construction to represent the flow of all economic transactions occurring in an economy is a social accounting matrix in which each corresponding row-column entry accounts for. [4]
National accounting has developed in association with macroeconomics since the 1930s with the relation of aggregate demand to aggregate output through the interaction of broad expenditure categories such as consumption and investment . [5] Economic data from national accounts is also used for empirical analysis of economic growth and development .
Area
National accounts broadly present the production, expenditure and income activities of economic actors (households, corporations, government) in an economy, including their relationships with the economies of other countries and their assets (net worth). They present both flows (measured but that are over a period) and stocks (measured at the end of a period), ensuring that flows coincide with stocks. As a flow, national income and product accounts (in American terminology) provide estimates for income and money value per year or quarter, including GDP . In the form of shares, the ‘capital account’ is a balance-sheet approach that holds assets on one side (the value of land, capitalincluding stocks and financial assets) and liabilities and net worth on the other hand , measured as of the end of the accounting period. National accounts also include measures of change in assets, liabilities and net worth per accounting period. These can refer to flow of funds accounts or, again, capital accounts . [1]
In particular there are a number of measures in national accounts, including GDP or GDP , perhaps the most widely cited measure of total economic activity. Ways to break down GDP include types of income (wages, profits, etc.) or expenses (consumption, investment/savings, etc.). These measures are examples of macro – economic data . [7] [8] [9] [10] Such aggregate measures and their changes over time are generally of the strongest interest to economic policy makers, although detailed national accounts are a source of information for economic analysis. occurs, for example in input-output tableswhich show how industries interact with each other in the production process.
National accounts may be presented in nominal or real amounts, with actual amounts adjusted to offset the effects of price changes over time. [11] A uniform price index can also be derived from national production. Rates of change of the price level and output may also be of interest. An inflation rate (the rate of growth of the price level) can be calculated for national output or its expenditure components. Economic DevelopmentThe rate (usually the growth rate of GDP) is usually measured in real (constant-price) terms. One use of economic-development data from national accounts is in growth accounting over a long period of time to estimate the various sources of growth in a country or a country as a whole, whether from growth of factor inputs or technological change.
Accounts are derived from a wide variety of statistical source data, including survey, administrative and census data, and regulatory data, which are integrated and harmonized in a conceptual framework. They are usually compiled by national statistical offices and/or central banks in each country, although this is not always the case, and may be issued at both annual and (less detailed) quarterly frequency. Practical issues include the distinction between economic and accounting practices, the lack of controlled experiments on the quality of data from diverse sources, and the abstraction and measurement of services in the banking and financial sectors. [13]
Two developments related to national accounts since the 1980s include the following. Generational accounting is a method of measuring the redistribution of the lifetime tax burden across generations from social insurance, including social security and social health insurance. It has been proposed as a better guide to fiscal policy stability than the budget deficit, which reflects spending in the current year only after deducting taxes. [14] Environmental or green national accounting is a method of valuing environmental assets, which is not usually counted in measuring national wealth, partly because of the difficulty of their assessment. This method has been proposed as an alternative to an implicit zero assessment of environmental assets and as a way to measure the stability of welfare levels in the presence of environmental degradation.
Macroeconomic data not derived from national accounts are also of broad interest, for example some cost-of-living indices, unemployment rates, and labor force participation rates. [16] In some cases, an estimate of one of these national-account equivalents can be made, such as a price index calculated from personal consumption expenditure and the GDP gap (the difference between observed GDP and potential GDP). [17]
Key element
The presentation of national accounts data can vary by country (typically, aggregate measures are given the most prominence), although the main national accounts include the following accounts for the economy as a whole and its main economic actors.
- Current Accounts:
Production accounts that record domestic production and the value of goods and services used in the production of that production. The balancing item of accounts is value added, which is equal to GDP when expressed at market prices and in aggregate terms for the economy as a whole;Income accounts , which show primary and secondary income flows – income generated in production (such as wages and salaries) and distribution income flows (primarily the redistributive effects of government taxes and social benefit payments). the account balance is disposable income (“national income” when measured for the economy as a whole);Expense accounts , which show how disposable income is either consumed or saved. The balancing item of these accounts is savings.
- capital accounts, which record net accumulations as a result of transactions with non-financial assets; and financing through savings of accumulation and transfer of capital. The net credit/credit balance item for these accounts is
- Financial accounts, which show the net acquisition of financial assets and the net income of liabilities. The balance on these accounts is a net change in financial position.
- Balance sheet, which records the stock of assets, both financial and non-financial, and liabilities at a particular point in time. Net worth is the balance from the balance sheet (United Nations, 1993).
Accounts can be measured as gross or net of fixed capital consumption (a concept in national accounts similar to depreciation in business accounts).
Notably absent from these components, however, is unpaid work, as its value is not included in any of the above categories of accounts, just as it is not included in the calculation of gross domestic product (GDP). An Australian study has shown the value of this uncountable work to be around 50% of GDP, making its exclusion quite significant. [18] Since GDP is closely tied to the national accounting system, [19] this can lead to a distorted view of national accounts. Since national accounts are widely used by government policy-makers in implementing controllable economic agendas, [20] some analysts have advocated either a change in the makeup of national accounts or adjustments to the formulation of public policy. [21]
History
The original impetus for the development of national accounts and the systematic measurement of employment was the need for accurate measures of overall economic activity. This was further pressured by the Great Depression and as the basis for Keynesian macroeconomic stabilization policy and wartime economic planning. The first attempts to develop such measures were made in the late 1920s and 1930s, notably by Colin Clark and Simon Kuznets. Richard Stone of the UK contributed during and after World War II. The first formal national account was published by the United States in 1947. Several European countries followed soon after, and the United Nations published A System of National Accounts and Supporting Tables in 1952 . [1] [22]International standards have been defined for national accounting. by the United Nations National Accounting System with the latest version released for 2008. [23]
Even before this there were National Economic Accounts tables in the early 1920s. One of such systems was called the balance of the national economy and was used to measure the efficiency of socialist production in the USSR and other socialist countries. [24]
In Europe, the worldwide system of national accounts has been adapted to the European Accounting System (ESA), which is implemented by members of the European Union and several other European countries. Research on this topic has been going on since its inception.
