national accounts

It has been suggested that this article or section be merged into National Income and Product Accounts. (Discuss)

National accounts or national account systems (NAS) (more generally social accounts) summarize economic activity for a nation (or other geographic area) and provide more detailed underlying measures of such information. They rely on double-entry accounting, which by construction makes the totals on both sides of an account equal even though they each measure different characteristics (Ruggles, 1987). A central application of national accounts is the national income and product accounts (NIPA), which provide estimates for the money value of income and output respectively per year or quarter. NIPA entries are called flows, to indicate that they are measured over time. Another application is the national balance sheet as to assets on one side, including the capital stock, and liabilities and wealth on the other, measured as of the end of the accounting period. Entries here are called stocks, to indicate their accumulation to a point in time, as distinct from a flow, which is measured over time.

Price data may permit distinguishing nominal from real amounts, that is, correcting money totals for price changes over time (Sen, 1979; Usher, 1897). National accounts also include measurement international capital flows, foreign transactions, flow of funds, and input-output relationships. The accounts are derived from statistical surveys designed to provide a systematic summary of aggregate national economic activity.

Development

The original motivation for the development of national accounts and the systematic measurement of employment, was the need for accurate measures of aggregate economic activity. This was made more pressing by the Great Depression and as a basis for Keynesian macroeconomic stabilisation policy and wartime economic planning. The first efforts to develop such measures were undertaken in the late 1920s and 1930s, notably by Colin Clark and Simon Kuznets. Richard Stone led later contributions. The first formal national accounts in the United States were in 1947 (Ruggles, 1987, p.377).

Main components

The main national accounts include the following.

• National income and product accounts, which measure aggregate income in two ways:

production accounts which records the value of production (GDP), the income from production and the final expenditures on goods and services produced

income accounts, which show primary and secondary income. transactions, final consumption expenditures and consumption of fixed capital. Net saving is the balancing item for these accounts;

• Capital accounts, which record the net accumulation, as the result of transactions, of non-financial assets; and the financing, by way of saving and capital transfers, of the accumulation. Net lending/borrowing is the balancing item for these accounts
• Financial accounts, which show the net acquisition of financial assets and the net incurrence of liabilities. The balance on these accounts is the net change in financial position.
• Balance sheets, which record 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 sheets (United Nations, 1993).

References

• Laurence J. Kotlikoff (1992). Generational Accounting. Free Press.
• Nancy D. Ruggles (1987). "Social accounting," The New Palgrave: A Dictionary of Economics, v. 4, pp. 377-82.
• Amartya Sen (1979). "The Welfare Basis of Real Income Comparisons: A Survey," Journal of Economic Literature, 17(1), pp. 1-45.
• United Nations (1993) About the System of National Accounts 1993.

• D. Usher. (1987), "real income," The New Palgrave: A Dictionary of Economics, v. 4, p. 104.

See also

• Aggregation problem
• Real versus nominal value

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