Download Balancing Items

Introduction to the SNA, advanced
Lesson 3
Summarizing the accounts and key
balancing items
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1
Background
• Key features of the SNA are that it defines accounts that are
comprehensive, consistent and integrated
– the accounts consist of so-called “flow accounts” (which
measure the flows of production, income etc in an
accounting period) and balance sheets, which measure
the levels of assets and liabilities at the beginning and end
of an accounting period
• Each flow account relates to a particular kind of activity such
as production, or the generation, distribution, redistribution
or use of income
• Each flow account is balanced by an item that is estimated
residually as the difference between the total resources and
the identified uses in an account
Copyright 2010, The World Bank Group. All Rights Reserved.
2
T accounts
Uses
(and balancing item)
Resources
Intermediate consumption
Gross output
Value added
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3
T accounts
Uses
(and balancing item)
Resources
Intermediate consumption
Gross output
Value added
Value added = gross output less intermediate consumption
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4
Production account
Uses
Intermediate
consumption
Resources
400 Gross output
of which:
1,000
Market output (650)
Output for own final use (200)
Non-market output (150)
Net taxes on products
70
Value added
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670
5
Generation of income account
Uses
Compensation of
employees
Net taxes on production
and imports
Mixed income/
operating surplus
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Resources
350 Value added
670
80
240
6
Allocation of primary income account
Uses
Resources
Mixed income/
operating surplus
Property income
Balance of primary
incomes
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240
Compensation of
350
employees
Net taxes on production 80
and imports
125 Property income
125
670
7
Secondary distribution of income account
Uses
Resources
Balance of primary
incomes
Current transfers
350 Current transfers
Disposable income
630
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670
310
8
Use of disposable income account
Uses
Resources
Final consumption
expenditure
580 Disposable income
Saving
50
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630
9
Capital account
Changes in assets
Changes in liabilities and net
worth
Gross fixed capital
formation
85 Saving
Change in inventories
–7 Current external balance
Net acquisition of valuables 2 Net capital transfers
received
Net lending (+)/net
borrowing (–)
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50
5
–10
–35
10
Summary of accounts and balancing items
Account
Balancing item
Production
Value added
Generation of income
Mixed income/operating surplus
Allocation of primary income
Balance of primary incomes
Secondary distribution of income Disposable income
Use of disposable income
Saving
Capital
Net lending/borrowing
Copyright 2010, The World Bank Group. All Rights Reserved.
11
Other accounts
• The six accounts described above are the most important
accounts for analysing production and income flows
– in most countries, they are the accounts that are produced
first when establishing a system of national accounts
– generally it is easier to obtain the data for these accounts
than is the case with the remaining ones
• The remaining accounts are:
– Financial account
– Other changes in the volume of assets account
– Revaluation account
– Balance sheet
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12
Financial account
• The Financial account explains how financial assets owned by
one unit are put at the disposal of another
• Like the accounts already described, the Financial account
records transactions between institutional units (both
resident and non-resident)
– it shows the transactions involving financial assets and
liabilities that underlie the net lending or net borrowing
derived as a balancing item in the Capital account
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13
Financial account (continued)
• Unlike the accounts described above, there is no balancing
item in the Financial account, which means that the two sides
of the account should balance
– the net lending (or net borrowing) derived as a balancing
item in the Capital account is part of the “Changes in
liabilities and net worth”
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14
Other changes in the volume of assets account
• The Other changes in the volume of assets account provides a
link between the transactions recorded in the Capital account
and Balance sheet
– it records the changes in assets, liabilities, and net worth
between opening and closing balance sheets that are not a
result of transactions between institutional units or that
are not due to revaluations
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15
Other changes in the volume of assets account
(continued)
Other changes in volume arise from changes in quantity (or
quality) due to by economic or non-economic factors, such as
– economic appearance/disappearance
– catastrophic losses
– uncompensated seizures
– changes in classification
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16
Revaluation account
• The Revaluation account measures holding gains and losses
• In effect, a “holding loss” is a negative holding gain so the
term “holding gain” refers to a loss as well as an actual gain
• Holding gains can be divided into
– (i) nominal, (ii) neutral and (iii) real
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17
Revaluation account (continued)
• As an example, consider an asset purchased for 200, which
increases in value to 240 during the year in which inflation
was running at 5%
– the nominal holding gain is 40 (i.e. 240 – 200)
– the neutral holding gain is 10 (i.e. (200 x 1.05) – 200)
– the real holding gain is 30 (i.e. 40 – 10)
• A holding gain is realised only when an asset is disposed of or
a liability is repaid
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18
Balance sheet
• The SNA defines a Balance sheet as a statement, drawn up in
respect of a particular point in time, of the values of assets
owned and of the liabilities owed by an institutional unit or
group of units
• Balance sheets can be drawn up for a single unit, an
institutional sector or the whole economy
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19
Balance sheet (continued)
• Balance sheets are useful in identifying imbalances in an
economy or in sectors within it
– for example, analyzing consumer debt and incomes to
determine the sustainability of the debt, or to examine the
links between household borrowing and house values
• Net worth is the summary aggregate in a balance sheet and it
is the value of all the assets owned by an institutional unit or
sector less the value of all its outstanding liabilities
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20
Balance sheet (continued)
• Other uses of balance sheets are:
– providing a formal framework for applying values to
physical estimates of a country's natural resources
– determining household spending behaviour and liquidity
– examining ratios that can point to future economic
problems for a country (or institutional sector)
• e.g. assets to liabilities, net worth to total liabilities,
non-financial to financial assets, and debt to income
• Even though data on government debt is available in
Government Finance statistics, the SNA balance sheet enables
the level of debt to be analysed in conjunction with that of
other sectors
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21
References
• System of National Accounts, 2008
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