In capital accounts, additions to capital must be financed by saving, net capital transfers, or net borrowing.
ThusNNP at Factor Cost = NNP at Market Prices – Indirect taxes+ Subsidies= GNP at Market Prices – Depreciation – Indirect taxes + Subsidies.Normally, NNP at market prices is higher than NNP at factor cost because indirect taxes exceed government subsidies. During the following decade, the preparation of such estimates became almost universal.
First, there are the primary income flows, consisting of factor costs and the nonfactor charges against product, each of which is a debit to the consolidated production account and, in most cases, a credit to one of the several sectoral appropriation accounts. [Separate appropriation accounts show the receipt and disposition of income by sector. This involves taking the data on manufacturers’ sales or shipments, by type, adjusting for exports and imports, adding distributive markups and Some check on reliability is furnished by the accounting identities. c.it includes transfer payments. National income differs from net national product by an amount called: A) depreciation. Personal income is never equal to the national income, because the former includes the transfer payments whereas they are not included in national income.Personal income is derived from national income by deducting undistributed corporate profits, profit taxes, and employees’ contributions to social security schemes. The purchases of business on capital account are new construction, improvements to land, durable equipment, and additions to inventories. In the Canadian transactions account, saving minus tangible investment of each sector is entered as a credit (source of funds) along with increases in all the various types of liabilities, which also represent financial sources. It includes the gross value of output of all items from (1) to (4) mentioned under GNP.
Unincorporated business income is routed through the household account, so saving and capital formation of unincorporated businesses are included in the household capital reconciliation account. In balance sheets, the asset position of any unit or sector is balanced by liabilities plus a residual net worth. It is the cost of production.For example if the market price of rice is Rs. National income and product would be equal only if there were no indirect business taxes and subsidies or if they were offsetting.
On the debit side are entered all the uses of funds, as reflected in acquisition of assets of various types. The idea of capital has long had a strong materialistic bent that is evident in the dominance of material capital in economic thinking… Income A further breakdown of types of claims would be possible if its usefulness warranted the additional cost.Note that in principle, gross saving and gross investment are equal for each sector, as well as for the total economy, when gross investment includes net financial investment as well as tangible capital expenditures. That is, intermediate products, such as raw materials and semifabricated goods, are those consumed in the production process. The economic analyst will more frequently use the detail in supporting tables than he will the sector accounts, but the accounts are indispensable as an organizing framework to display the interrelationships among the many component variables.Data are seldom collected primarily for use in the economic accounts. This method is called “double deflation.” The aggregate of real product for all industries should be identical with real final product, if consistent price deflators are used.The input-output, or interindustry relationships, matrix is, in effect, a disaggregation of the industry production accounts. The table starts with gross saving (line 1) and gross investment (line 4). It should also be observed that financial flows for each sector are generally recorded on a net transaction basis for each category. (ii) Gross private domestic investment in capital goods consisting of fixed capital formation, residential construction and inventories of finished and unfinished goods. Finally, there are the balancing items, con sisting of savings of the several sectors, which are credits to the saving-investment accounts, and of net foreign investment, which is a debit.It should be noted that the U.S. system does not recognize capital formation by the household and government sectors. The chief components of income and product are shown in Table 2 and SNA accounts 1 and 2 are shown in Table 3; these tables will be discussed later. The use of balancing accounts is statistically advantageous in providing checks on estimates or in permitting the estimation of important variables as residuals.The accounting rule that for each credit there must be a corresponding debit reflects the twosided nature of transactions. Fill in your details below or click an icon to log in: These show time series for the key variables of the accounting presentation, which generally relates only to the most recent period. It can be argued that these goals are instrumental; but if they are admitted to a position of coordinate importance with the goal of creation of positive present and future utility, then most of the costs of general government would qualify as final.
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