The accounts that furnish in nutshell the information on various flows in an economy are the following four accounts collectively referred to as the Consolidated Accounts of the Nation:
(i) Account-1:
Gross Domestic Product and Expenditure Account: This account shows GDPMP by income method on the left side and by expenditure method on the right side.
Thus, compensation of employees, operating surplus, mixed incomes, NIT and depreciation appear on the left side while government and private final consumption expenditures (CG + CH), Gross Domestic Capital Formation (GDCF) and net investment abroad (X – M) on the right side.
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(ii) Account-3:
ADVERTISEMENTS:
National Disposable Income and its Appropriation Account: This account records Net National Disposable Income at market price by income method on the right side and the same by expenditure method on the left side.
Net National Disposable Income at market price by income method includes NNPMP (Compensation of employees + Operating surplus + Mixed incomes + NIT + Net factor income from abroad) and Net Other Current Transfers from ROW.
Net National Disposable Income at market price by expenditure method includes government and private final consumption expenditures (CG + CH) and savings (SF + SH + SG). SF, SH, & SG represent savings of firms, households and government respectively. Note that savings finance net domestic capital formation (NDCF, which is GDCF less depreciation) and net investment abroad (X – M).
ADVERTISEMENTS:
Gross National Disposable Income at market price can be obtained by adding depreciation to Net National Disposable Income at market price.
(iii) Account-5:
Capital and Finance Account: This account records sources of financing the capital formation on the right side (savings, depreciation and net capital transfers from ROW) and capital accumulated on the left side. Capital accumulated comprises GDCF (GDFCF + AS) and net purchases of intangible assets from ROW.
(iv) Account-6:
External Transactions Account: This account records Net Exports (X – M), Net Factor Income from Abroad (NFIA), net other current transformations from ROW (NOCT from ROW) and net capital transfers from ROW on the left and net purchases of intangible assets from ROW on the right side.
[The reader may note that preparation of these consolidated accounts is not a part of the current syllabus but calculation of any side (left or right) of accounts 1 & 3 may be expected, of the students. Accounts 5 & 6 don’t form a part of the syllabus at all].