National Accounts: Characteristics, Importance, Main Accounts and Analysis

The National contability it is a record that keeps up to date the accounts of all the economic activities of a country. In this way, the entire economic flow of the country can be controlled and measured both among its internal economic actors and with external actors, giving us an image of the economy and its development over time.

This registry will allow us to know different data. For example, how the income of the different economic agents (the workers, the public administration, companies and owners of capital) is distributed from their own country, how they use that income, what they consume, what they save or what they invest. .

The results of this accounting are reflected in several synthesizing magnitudes. The most important are the Gross Domestic and Net Product (GDP and PIN) and the Gross, Net and Available National Income (GNI, RNN and RND).

characteristics

The main characteristics of national accounting are the following:

It serves to know the state of the economy

Thanks to the national accounts, all the economic activity of a country is registered, so that it can be judged later.

It is an instrument of economic policy

These data are essential to be able to carry out economic policies that adapt to the situation of the country. If this accounting did not exist, there would be no way of knowing the state of the economy of that area, so that economic policies could not be implemented effectively.

From it you get the Domestic Product and the National Income

The results of this accounting are synthesized in different ratios to measure the economy of the countries. The most important are GDP, PIN and Gross National Income, Net and Available.

Importance

National accounting is essential when measuring the economic activity of a region. As in any company, a very meticulous record must be kept of all transactions carried out over a period of time.

In this way, different levels of income, investment, consumption, imports and exports, savings, etc., can be measured from one period to another. Thanks to the national accounting you can know data such as the following:

- The national production of a country or region.

- The expenditure of families, companies and government.

- Imports and exports.

- The income of all economic agents.

Main accounts

The presentation of national accounting data may vary from one country to another. However, the accounts are always grouped into these three groups: current accounts (production, income and income use accounts), accumulation accounts (capital, financial account, other changes in the volume of assets and revaluation). and the accounting balances.

Current accounts

Production account

Registers the value of all national final products and the goods and services used to produce them. The accounting balance is the added value.

Income account

It reflects primary and secondary income flows, both generated by production (for example, wages and salaries) and by distributive income flows (for example, the redistributive effects of government taxes and payments of certain social benefits). The balancing item is called disposable income.

Income utilization account

It shows how the disposable income is consumed or saved. The account balance of this account is savings.

Accumulation accounts

Capital account

It records the result of the transactions of non-financial assets and financing, in the form of savings and capital transfers. The accounting balance of this account is called a loan or net indebtedness, depending on whether it is positive or negative.

Financial account

Registers financial instrument transactions. This mode shows the loan or net indebtedness of the country.

Account for other changes in the volume of assets

This account shows the exceptionalities that cause the volume of assets or liabilities to vary. The financial accounts record the acquisitions of financial assets and the net incurrence of liabilities.

Revaluation account

It reflects the total variation of the value, caused by the price variations of the different assets or liabilities.

Balances

A balance sheet is defined as an accounting statement, made at a given moment in time, of the values ​​of assets and liabilities with which an economic agent has an account.

On the left side the assets are placed, while on the right side the liabilities and the net value are placed.

Analysis

Without further analysis, all the data offered by the national accounts would be useless. To achieve a successful subsequent analysis there are several macroeconomic aggregates that help us understand and synthesize the situation of the specific country.

Gross Domestic Product (GDP)

GDP can be obtained in two different ways. According to the first, GDP is equal to the value of production less intermediate consumption plus taxes, less subsidies, of products not yet included in the production account.

The second way to obtain GDP would be through the sum of consumption, plus the gross formation of capital, plus exports and less imports.

Net Domestic Product (PIN)

While GDP is a reliable and important calculation in the measurement of the aggregate economy, it is not the best way to measure income. This is because it has consumption from production (production costs and depreciation of the capital stock).

Restoring this consumption, we obtain the PIN, a more reliable quantity when measuring total income.

Gross and Net National Income (GNI and RNN)

The Gross National Income (GNI) results from adding to the GDP the income from abroad (through salaries collected, property income collected, taxes received and subsidies) and subtracting the expenses sent abroad (through salaries paid, property rents paid, taxes sent and subsidies).

As in the case of the PIN, the GNI is more accurate when it comes to measuring income if we subtract the consumption of fixed capital, which would give us the RNN.

National Income Available (RND)

The RND results from adding to the RNN the current transfers collected abroad and subtracting the current transfers paid abroad.

References

1. United Nations, The System of National Accounts and National Accounts Data.
2. Australian Bureau of Statistics, Concepts, Sources and Methods, Chapter. 4,"Economic concepts and the national accounts","Production","The production boundary"
3. Coyle, Diane. "Warfare and the Invention of GDP". The Globalist. Retrieved August 1, 2015
4. GDP (Official Exchange Rate) (PDF).World Bank.
5. National Accounts". Central Bureau of Statistics.