SNA Components and Sequence of Accounts 1: Current Accounts

The current accounts record the production of goods and services, the income generation, distribution, redistribution, as well as the use of income for consumption or saving.

All the income accounts record resources on the right hand and uses on the left hand side. Furthermore, to balance the accounts a balancing item is introduced on the uses side. This balancing item is carried forward as resource in the next account - making it a sequence of interconnected accounts. Examples on balancing items are value added, GDP (for the nation as a total), disposable income and saving.

The account records the activity of producing goods and services. Its balancing item is value added. Value added is defined as output less intermediate consumption.

Output can be measured at basic or producer prices, while intermediate consumption always is measured at purchasers prices. If output is measured at basic prices, then value added is said to be measured at basic prices. Likewise, if production is measured at producers prices, then value added is at produces prices.

GDP is a concept defined at purchasers’ (market) price only. Thus, if value added is measured at basic prices, then total value added is adjusted by adding taxes less subsidies on all domestic produced and imported goods and services to reach Gross Domestic Product, GDP. And, if value added output is measured at producers prices, total value added is adjusted by adding value added type taxes and taxes on imports, net, to reach GDP.

Output; consists of those goods and services that are produced within an establishment, and become available for use outside that establishment, or for own final use within the establishment. Thus, goods and services produced for intermediate consumption within the same establishment will not be included in output.

Intermediate consumption; consists of the value of the goods and services consumed in the process of production, excluded are fixed assets whose consumption is recorded as consumption of fixed capital.

Consumption of fixed capital; represents the reduction in the value of the fixed assets used in the process of production during the accounting period resulting from physical deterioration, normal obsolescence, or normal accidental damage.

Taxes on products; consist of taxes, excluding VAT, export and import taxes, payable on goods and services when they are produced, delivered, sold, transferred or otherwise disposed of by their producers.

Subsidies on products; consists on subsidies on goods and services produced that become payable when as a result of the production, sale, transfer, leasing or delivery of those goods or services, or as a result of their use for own consumption or own capital formation.

Taxes less subsidies on products; Equals Taxes on products less Subsidies on products.

The distribution of income is particularly interesting when looking at each sector separately. Thus, the system identifies a number of accounts to record transactions involved in the income-distribution.

The first one is the generation of primary income account, which records the distribution directly linked to the production-process - compensation of employees and taxes on production and imports, net. The transactions are recorded from the producers point of view. Therefor, the account shows on the resources side gross/net value added, carried forward from the production account, and on the uses side compensation of employees and taxes less subsidies on productions and imports, in as far as they are included in the value of output. The balancing item is operating surplus / mixed income.

Mixed income is the concept used for operating surplus in the household-sector. The owner of a household un-incorporated enterprise usually has a dual role to play, both as a entrepreneur and as a worker contributing with labor input which could be provided by paid employees. Because of the wage-element included in the surplus, the name mixed income, neither solely surplus nor wages.

Compensation of employees; total remuneration - in cash or in kind - paid by an enterprise to an employee in return for work done during the accounting period.

Taxes on production and imports; consist of taxes payable on goods and services when they are produced, delivered, sold, transferred or otherwise disposed of by their producers plus other taxes on production, consisting mainly of taxes on the ownership or use of land, buildings or other assets used in production or on the labour employed, or compensation of employees paid.

Subsidies; subsidies are current unrequited payments that government units make to enterprises on the basis of their level of production activities or the quantities/values of goods and services which they produce, sell or import. Subsidies can be classified either as subsidies on products or as other subsidies on production.

The account records the remaining part of the primary distribution of income. On the resources side are operating surplus / mixed income, carried forward from the generation of primary income account, in addition to compensation to employees which is a resource in the account for the household-sector, taxes less subsidies which is a resource for the government, and any form of property income receivable for the relevant sectors. Property income can be interest, distributed income from corporations like dividends and withdrawals, reinvested earnings on direct foreign investment, property income attributed to insurance policyholders or rent (except rent on buildings). On the uses side are recorded property income payable. The balancing item in this account is Balance of primary income, or for the nation Gross (Net) National Income (GNI).

Compensation of employees; see above

Taxes on production and imports; see above

Subsidies; see above

Property income; consists of income received by owners of financial or tangible non-produced assets in return for providing funds to, or putting the tangible non-produced assets at the disposal of another institutional unit.

It can be seen from this account that the difference between GDP and GNI (GNP) is the difference between primary income payable to abroad and primary income from abroad. So while GDP measures the value of production within the boundary, no matter who produces the income, GNI measures the value of the incomes of the resident people, no matter where it is earned.

This account covers the principle redistribution of income in form of transfers in cash only. Recorded here is the balance of primary income as a resource, current taxes on income and wealth, social benefits, and other current transfers as both resources and uses, since what is a resource for one sector is use for another. The balancing item is Disposable income.

Disposable income is the amount available for consumption-expenditure and/or saving (investment and capital transfers).

Current taxes on income and wealth; consists of taxes on the income of households or profits of corporations and taxes on wealth that are payable regularly every tax period (as distinct from capital taxes levied infrequently).

Social contributions; actual or imputed payments to social insurance schemes to make provision for social insurance benefits to be paid.

Social benefits in cash; current transfers payable to households by government units or NPISHs to meet the same needs as social insurance benefits but which are not provided outside and organized social insurance scheme incorporating social contributions and social insurance benefits.

Other current transfers; consists of net premiums and claims for non-life insurance, current transfers between government units, current grants, as well as current transfers to non-profit institutions and households.

The redistribution of income account is a new account in the 93SNA, showing two more elements in the process of redistribution. It records social benefits in kind, which includes both benefits for which the households do not incur the expense and benefits for which the households make the initial outlay and are later reimbursed. The account also records the transfer of individual non-market goods and services, such as education and health, not included in social benefits in kind. Both types of transactions are included under the heading Social transfers in kind.

This account is relevant only for the household sector, which is the recipient of the social benefits in kind, and the government sector and the non-profit institutions serving households (NPISHs), which are both 'serving' the households.

The account records on the resources side disposable income, carried forward from the secondary distribution of income account, and social transfers in kind as a resource for the household and as use for the government sector and the NPISHs. The balancing item is Adjusted disposable income. Adjusted disposable income will be higher than disposable income for the household sector, and lower for the government and the NPISHs.

The purposes of this account are (i) to give a clearer picture of the role of government and NPISHs, (ii) to deliver a more complete measure of household income, (iii) to give a more complete picture of the redistribution process between sectors, and (iv) to facilitate international comparisons and comparisons over time when economic and social arrangements differ or change.

Social transfers in kind; consists of individual goods and services provided as transfers in kind to individual households by government units and NPISHs, whether purchased on the market or produced as non-market output by government or NPISHs.

This account shows how disposable income is used either for the purpose of consumption expenditure or for saving. The account records disposable income as resource and consumption expenditure as use. The balancing item is Saving.

Consumption-expenditure covers the amount used on goods and services for final consumption. Excluded here is consumption of goods and services used in a production-process (intermediate-consumption is recorded in the production account).

Only the households, the government and the non-profit institutions serving households have final consumption expenditure.

Final consumption expenditure; consists of the expenditure, including imputed expenditure, incurred by general government on individual and collective goods & services, and incurred by households and NPISH on individual goods & services.

Adjustment for the change in net equity of households on pension funds; the adjustment is an imputation. Pension funds are considered to be assets of households, not of the institutional units that mange them (the financial sector). The households pay contributions to and receive benefits (when retired) from the financial sector. Any difference between contributions paid and benefits received should be considered part of the households saving, since the household is the owner of the assets. To accomplish this an adjustment item is introduced. The adjustment is a resource (positive or negative) for the household sector and an use for the financial sector.

Like the redistribution of income in kind account, this is a new account in the 93SNA. The purpose with this account is to measure the sectors actual final consumption.

Actual consumption for households covers goods and services which are effectively available for individual consumption by household, regardless of whether the ultimate bearer of the expense is the household itself, government or NPISHs. Consequently, actual final consumption for the government refers only to collective consumption, while NPISHs by definition has no actual final consumption since all their consumption are individual by nature, and transferred to the households.

The account records on the resources side adjusted disposable income, and on the uses side actual final consumption. Balancing item is Saving.