System of National Accounts represents a coherent and detailed system of accounts and macroeconomic tables providing a comparable and complete imagine of the economic activity of one country.
This system classifies the large variety of economic flows in a limited number of fundamental categories including them in an outlook, which allows for a representation of the economic circuit adjusted to the need for analysis, forecast and economic policy to be obtained.
Main concepts of the System of National Accounts
Goods and Services Account shows the balance between the total goods and services supplied as resources to the economy as output and imports (including the value of taxes less subsidies on products not already included in the valuation of output) and the use of the same goods and services as intermediate consumption, final consumption, capital formation and exports.
Production Account describes the operations that constitute the production process itself. The account is established as total per economy, by types of economic activities and institutional sectors. It reflects in resources the production of goods and services, taxes and subsidies on products, and in uses – the intermediate consumption. The balance of the account, at the level of economy, is represented by the Gross Domestic Product, and at the level of economic activity – the Gross Value Added.
Generation of Income Account reflects the distribution of primary incomes to institutional-resident units directly engaged in the production of goods and services. In the compartment of resources there is included one single element – the Gross Domestic Product, on the level of economy, and at the level of economic activity and institutional sector - the Gross Value Added, in the uses compartment are included as follows:
- wages and work remuneration (in monetary and in kind form) of employees;
- taxes on production and import and subsidies (on the level of economy)
- other taxes on production and other subsidies on production (at the level of economic activity and institutional sector).
The balancing item of this account is represented by the gross operating surplus or gross mixed income.
Allocation of Primary Income Account characterizes primary income distribution obtained from the production activity or those obtained from among residents (institutional units and sectors). The resources of the account contain the operating surplus, gross mixed income, ownership incomes (receivable), and the remuneration of employees (which is reflected only in the sector “households”), net taxes on production and import, reflected in the resources of the sector “public administration”.
The uses of the account include the incomes on ownership payable. The balancing item of the account is, on the level of economy, the Gross National Income, and at the level of institutional sector – the balance of primary incomes (gross).
Secondary Distribution of Income Account reflects the transformation of the balance of primary incomes (gross) by institutional sectors into gross disposal income (in the institutional sector), as a result of receipts and payments of current transfers.
The balancing item of the account is, on the level of economy, the Gross National Disposable Income.
Use of gross disposable income account shows how households, public administration and non-profit institutions serving households distribute their disposable income between final consumption expenditures and gross savings.
The Redistribution of Income in Kind Account shows the way that gross disposable income (transferred from secondary distribution of income account) of households, public administration and non-profit institutions serving households is transformed into gross adjusted disposable income, as a result of receipts or payments of social transfers in kind.
Use of gross adjusted disposable income account shows how gross adjusted disposable income is divided into final actual consumption and gross savings on institutional sectors.
Capital Account reflects the value of non-financial assets purchased or sold by institutional units – residents and shows the changes in net value of own capital from the savings and capital transfers account.
The net lending (+) or borrowing (-) represents the balancing item, which reflects the resources, payable by the national economy to the rest of the world, or receivable from the rest of the world (if there is a need for funding).
Economic activity – the process that leads to the production of a similar set of outputs (goods, services), which characterizes the most aggregated categories of classification of economic activities.
Institutional Sector – regrouping of institutional units in assemblies, from the point of view of main functions performed and sources of financing.
Institutional unit – the resident economic unit (having an interest centre thus developing an economic activity not less than one year on the given territory), being able to take decisions exercising its main function and/or being the owner of assets (has both accounting documents including all the economic and financial operations done during the period, as well as a balance of its assets and liabilities).
The institutional resident units – are classified by institutional sectors: non-financial corporations, financial corporations, public administration, households, non-profit institutions serving households.
The economic relations with other countries are reflected in the “Rest of the World”, that brings together all non- residential institutional units, in the cases in which they interact with residents.
The non-financial corporations sector comprises the non-financial institutional units whose main function is to produce non-financial goods and services for market purposes and whose main resources derive from sale of production. This sector includes the activity of non-financial economic agents, with financial autonomy, whatever form of ownership it is.
The financial corporations sector includes the institutional units, whose main function is funding i.e. collection, transformation and redistribution of financial assets. The main resources of these units constitute the funds resulting from the commission works performed, interests, securities, bonds and interest received.
This sector includes crediting and security companies, insurance companies and other financial corporations.
Public Administration sector includes the institutional units, whose main function is to produce non-market services intended for individual and collective consumption and to perform operations of redistribution of state incomes, market services providing, borrowings.
The resources of these units are financed by compulsory contributions made by institutional units, as well as from property income, market services providing, borrowings.
Non-profit institutions serving households sector regroups the institutional units, that render non-market services to households and whose resources, come from voluntary contributions made by households, also from ownership incomes.
The sector includes social organizations, political parties, trade unions, religious cults, cultural and sports association etc.
Household sector includes separate units and groups of units, performing simultaneously the function of consumers and, eventually, the function of entrepreneurs.
The main resources of these units are the remuneration of employees, the ownership incomes and transfers from other sectors, or the incomes in the result of sale of production.
Gross Domestic Product (GDP) – the main macroeconomic aggregate of the System of National Accounts, that characterizes the final result of production activity of resident producing units, and which corresponds to the value of goods and services, produced by these units for final consumption. According the System of National Accounts, the GDP is calculated by three methods.
a) Production method
GDP = GVA + TP – SP,
b) Expenditure method
GDP = FC + GFCF + SV + (E – I),
c) Income method
GDP = WR + GOS/GMI + TPI – S,
Production – includes all goods manufactured and services rendered during a reporting period.
Production of goods and services for market purposes represents the production which is or can be sold at prices of economic significance.
Production of services for non-market purposes constitutes the production provided for other institutional units for free or at prices which are not economically significant.
Intermediate Consumption (IC) represents the value of goods and services (except the consumption of fixed capital) which are transformed or totally consumed during the production process.
Gross Value Added (GVA) is the balancing item of production account and is measured as the difference between the value of goods and services produced and intermediate consumption, thus representing the new value created in the production process.
Work remuneration (WR) represents the remuneration in monetary or in kind form, paid by the employer to the employee for the work performed in the reporting period. The remuneration of employees includes the gross calculated sums, including premiums, bonuses, advantages in kind, income taxes and payments in social security funds and other payments.
Taxes on production and import (TPI) cover the taxes on products and other taxes on production activity.
Taxes on products (TP) – taxes paid proportionally to the quantity or the value of goods and services produced, sold or imported by the residents. Here are included the value added tax, excises, taxes on imported goods and services.
Other taxes on production (OTP) constitute all the taxes, except the taxes on products, which are paid by the enterprises and organizations during their participation in the production process.
Subsidies include subsidies on products and other subsidies on production.
Subsidies on products – amounts paid per unit of good and service produced or imported.
Other subsidies on production – amounts granted by budget for covering losses.
Net taxes on products – taxes on products minus subventions on products.
Gross Operating surplus / Gross mixed income (GOS/GMI) is the balancing item of the Income Generation Account, and represents the part of new created value which remains at the producers after the remuneration of employees and the payment of net taxes on production and import. The income from the production process of the enterprise, which is households’ ownership is called gross mixed income, because it reflects the work remuneration, done by the owner of enterprise, as well as the profit from entrepreneurial activity.
Ownership Incomes – include the incomes, receivable or payable, paid by institutional units on the use of financial assets, land and other non-financial, non-production assets.
Capital transfers constitute operations with unique character and considerable as value, related to the procurement or sale of the participants’ assets in these operations. Here are also included taxes on capital, subsidies for investments and other capital transfers.
Social transfers in kind cover the individual goods and services provided to households in form of transfers in kind by the public administration and non-profit institutions serving households.
Balance of primary incomes (gross) characterizes the incomes of resident institutional units in the result of their participation in the production process and from property. It is determined as difference between all the primary incomes received and paid by the resident units. On economic level, balance of primary incomes calculated in gross basis, i.e. till the exclusion of consumption of fixed capital, represents Gross National Income.
Gross Disposable Income measures the part from new created value, that nation has, for final consumption and gross economy. This is equal to balance of primary incomes (gross) minus incomes transmitted as current transfers plus current incomes received. The total amount of disposable incomes on all residential institutional units is equal to Gross National Disposable Income.
Final Actually Consumption includes all the goods and services purchased by resident households for the satisfaction of human needs, both individual and collective ones.
Final Consumption of households includes all the goods and services used directly for the satisfaction of individual needs of resident households.
Final Consumption of public administration represents expenditures of public administration for purchase of goods and services in the benefit of community or for the separate groups of households.
Final Consumption of non-profit institutions serving households sector represents the expenditures of these units for the purchase of goods and services to provide them for free to households as social transfers in kind.
Total Final Consumption sums the expenditures of households, those of public administration for the individual and collective goods and services, as well as the expenditures of the non-profit institutions serving households sector.
Gross Economy represents the balance of use of gross disposable income and measures the part from gross disposable income which is not used for the expenditure of final consumption.
Gross accumulation measures the net value of resident units’ acquisitions of goods and services, produced but not consumed in the current period, and includes the gross fixed capital formation, the stocks variation.
Gross Fixed Capital Formation (GFCF) represents the value of tangible assets, purchased by the resident units in order to be used in the production process.
Changes in inventories represent the difference between stocks at the beginning and at the end of period. The stocks represent the goods which are not included in the gross fixed capital formation existing in the production unit.
Financial Intermediation Services Indirectly Measured (FISIM) are determined indirectly conventional by the balance between the interests receivable and payable by the financial institutions, being the result of their activity of financial intermediation.
Principles of evaluation: In the System of National Accounts the evidence of economic operations is made in prices used at the moment of transactions (current prices).
Gross Domestic Product is elaborated in current market prices. The current market price includes marketing and transport margins, taxes on products and excludes the subsidies on products. In order to eliminate the influence of various taxes and subsidies in different branches of the economy on the structure of production and generation of income, branch indicators are valued at basic prices.
Basic Price is the amount receivable by the producer for a unit of good or service excluding any taxes on products and including subsidies on products.
Non-market production is evaluated at current prices using market prices at similar goods and services sold on the market, when it is possible to determine them, or, by expenditures on production when market prices are not available.
In the SNA, such indicators as gross value added, gross operating surplus, stock variation are calculated, excluding holding gains, which are defined as the value of production generated due to changes in prices during the period when the products were held in stocks.
Reevaluation in comparable prices (prices of the previous year) is made for GDP both from the production side and from the use side.
Reevaluation of production and intermediate consumption in comparable prices is made by two methods:
- deflation of data in current prices for the accounting period by corresponding price indices;
- extrapolation of data in current prices for the base year by volume indices or physical indicators.
For the reevaluation of the GDP components by uses are used both respective price indices (consumption price indices, investment price index etc.) and physical indicators.
GDP deflator index is the ratio of GDP calculated in current market prices to the volume of gross domestic product calculated in prices of the previous year. Unlike price indices for goods and services, the gross domestic product deflator characterizes the change in remuneration, gross operating surplus/gross mixed income), fixed capital consumption resulting from changes in prices and nominal net taxes.