ComptaNat.fr
 
  The National Accounts Website  
 

Simplified sequence of accounts

Presentation

The accounts of an economic agent present its transactions, i.e. the flows that it decides or accepts and that impact on the level or the composition of its wealth.

For an economic agent, there are only two ways for increasing its wealth:

During the reference period, the economic agent can use this wealth in three different ways:

Accumulation can be negative since an agent can use the wealth he had accumulated during the previous periods.

Wealth is composed of assets, i.e. of stores of values, and of liabilities, i.e. of debts that are deducted from wealth. An agent can modify the composition of its wealthe in two different ways:

National accounts do not record the purchases and the sales of assets but only their changes during the period.

The account of an economic agent presents the origin and the use of its assets. In its simplest form, it can be presented as follows:

Consumption is broken down in two parts:

Transfers are broken down in several categories:

Assets are broken down in the following categories:

The account of an economic agent can be presented as follows:

For the needs of the economic analysis, the account of the agent is broken down in sub-accounts that make appear balance items. These balance items do not modify the global balancing since they appear both in the left column of each sub-account and in the right column of the following sub-account:

Production account

The production account is the first sub-account, its balance item is value added:

Production account
UsesResources
Intermediate consumption
(consumption of fixed capital)
Output
 
 
Value added

If intermediate consumption appears in uses, the value added is net, otherwise it is gross.


Primary distribution of income account

The primary distribution of income account includes value added and the primary income received in resources, the primary income paid and its balance item, the balance of primary income, in uses.

The primary income is composed of:

The primary distribution of income account is broken down in two sub-accounts: the generation of income account and the allocation of primary income account.

Generation of income account

The generation of income account includes, in resources, the value added in resources and, in uses, the flows that can be considered as costs of production. Its balancing item is the operating surplus for the corporations and the mixed income for the households. The generation of income accounts is as follows:

Generation of income account
UsesResources
Compensation of employees
Other taxes on production
Minus other subsidies on production.
Value added
 
 
 
Operating surplus / mixed income

When the value added is gross, the operating surplus is gross, when the value added is net, the operating surplus is net.

Allocation of primary income account

The next sub-account is the allocation of primary income account. In resources appear the operating surplus; the mixed income; the primary incomes considered as production costs in the previous sub-account; and the property income received. In uses appears the property income paid.

Allocation of primary income account
UsesResources
Property income
 
 
 
Operating surplus / mixed income
Compensation of employees
Taxes on production and imports
Minus subsidies
Property income
Balance of primary incomes

The balance of primary income can be gross or net.

The allocation of primary income account is not the same for all sectors. For corporations, it is as follows:

Allocation of primary income account of corporations
UsesResources
Property income Operating surplus
Property income
Balance of primary incomes

For general government, the allocation of primary income account is as follows:

Allocation of primary income account of general government
UsesResources
Property income
 
 
Operating surplus
Taxes on production and imports
Minus subsidies
Property income
Balance of primary incomes

The allocation of primary income account of general government also includes in resources taxes and subsidies on products that do not come from the generation of income account but from the goods and services account.

For households, it is as follows:

Allocation of primary income account of households
UsesResources
Property income
 
Operating surplus / mixed income
Compensation of employees
Property income
Balance of primary incomes

Secondary distribution of income account

The following sub-account is the secondary distribution of income account, it shows how the redistribution transactions impact on the income of the economic agents.

Secondary distribution of income account
UsesResources
Current taxes on income, wealth
Social contributions
Social benefits
Other current transfers
Balance of primary income
Current taxes on income, wealth
Social contributions
Social benefits
Other current transfers
Disposable income

The disposable income can be gross or net. The secondary distribution of income account is not the same for all sectors. For corporations, it is as follows:

Secondary distribution of income account of corporations
UsesResources
Current taxes on income, wealth
Social benefits
Other current transfers
Balance of primary income
Social contributions
Other current transfers
 
Disposable income

Social contributions and benefits in this account are those of firms that give social contributions to their employees.

For general government, the secondary distribution of income account is as follows:

Secondary distribution of income of general government
UsesResources
Current taxes on income, wealth
Social benefits
Other current transfers
Balance of primary income
Current taxes on income, wealth
Social contributions
Other current transfers
Disposable income

For households, it is as follows:

Secondary distribution of income account of households
UsesResources
Current taxes on income, wealth
Social contributions
Social benefits
Other current transfers
Balance of primary income
Social contributions
Social benefits
Other current transfers
 
Disposable income

The social contributions that appear in resources and the social benefits that appear in uses in this account are those of unincorporated enterprises that give social benefits to their employees.

Redistribution of income in kind account

For general government and households, the redistribution of income in kind account calculates the adjusted disposable income that takes into account the social transfers in kind. For general government, it is as follows:

Redistribution of income in kind account of general government
UsesResources
Social transfers in kind Disposable income
 
Adjusted disposable income

For households, the redistribution of income in kind is as follows:

Redistribution of income in kind of households
UsesResources
  Disposable income
Social transfers in kind
Adjusted disposable income

Use of income account

The use of income account shows how the disposable income is used for consumption and for saving. Saving can be gross or net. For corporations, this account is as follows:

Use of income account for corporations
UsesResources
Adjustment for pension funds Disposable income
 
Saving

Adjustment for the change in net equity of households in pension fund reserves is necessary since pension funds are treated in non-financial accounts like social security schemes that receive and pay transfers, i.e. transactions that do not create assets or liabilities, while they are treated in financial accounts like financial institutions, the pension funds reserves being considered as assets for households.

For general government and households, the use of income account has two versions corresponding to the two different definitions of final consumption, i.e. the final consumption expenditure and the actual final consumption. The use of disposable income account calculates saving as the difference between disposable income and final consumption expenditure. For general government and households it is as follows:

Use of disposable income account
UsesResources
Final consumption expenditure
Adjustment for pension funds
Disposable income
 
 
Saving

The use of adjusted disposable income calculates saving as the difference between adjusted disposable income and actual final consumption. For general government and households, it is as follows:

Use of adjusted disposable income account
UsesResources
Actual final consumption
Adjustment for pension funds
Adjusted disposable income
 
 
Saving

The existence of two series of accounts is the consequence of the recording of individual consumption expenditure of general government that is paid by government but benefits to identifiable households. Two options are possible:

The first option corresponds to the secondary distribution of income account associated with the use of disposable income account, the second option corresponds to the redistribution of income in kind account associated with the use of adjusted disposable income account.

For general government we have:

Final consumption expenditure of general government
= Actual final consumption
+ Social transfers in kind

And for households:

Final consumption expenditure of households
= Actual final consumption
− Social transfers in kind

The use of disposable income shows how the disposable income is used for final consumption expenditure and saving:

Social transfers in kind are introduced to obtain the adjusted disposable income and the actual final consumption. In the account of households, the final consumption expenditure is replaced by the difference between the actual final consumption and the social transfers in kind; in the account of general government the final consumption expenditure is replaced by the sum of the actual final consumption and the social transfers in kind:

And finally:

Capital account

The capital account shows how economic agents use their saving and capital transfers they have received to acquire non-financial assets. It is the same for all sectors:

Capital account
Changes in assetsChanges in liabilities
Gross fixed capital formation
(minus consumption of fixed capital)
Changes in inventories
Acquisitions less disposals of valuables
Acquisitions less disposals of non-produced assets
Saving
Capital transfers, receivable
Minus capital transfers, payable
 
 
 
Net lending (+) / Net borrowing (-)

The consumption of fixed capital should be deducted only when saving is net, when saving is gross the consumption of fixed capital should not be deducted.

Financial account

The financial account shows the acquisition less the disposal of financial assets by economic agents and the increase in their liabilities. Its balancing item is also the net borrowing / net lending. In a simplified form, it is as follows:

Financial account
Changes in assetsChanges in liabilities
Net acquisition of financial assets:
    Monetary gold and SDRs
    Currency and deposits
    Securities other than shares
    Loans
    Shares and other equity
    Insurance technical reserves
    Other accounts receivable
Net incurrence of liabilities:
    Currency and deposits
    Securities other than shares
    Loans
    Shares and other equity
    Insurance technical reserves
    Other accounts payable
Net lending / net borrowing

Other changes in assets accounts

Some events that an economic agent does not control can also impact on the level of its wealth. In national accounts, these events are classified in two categories:

Each of these two categories corresponds to an account.

Other changes in volume of assets accounts

Other changes in volume of assets accounts
Changes in assetsChanges in liabilities
Economic appearance of non-produced assets
Economic appearance of produced assets
Natural growth of non-cultivated biological resources
Economic disappearance of non-produced assets
Catastrophic losses
Uncompensated seizures
Other volume changes in non-financial assets n.e.c.
Changes in classifications and structure
Catastrophic losses
Uncompensated seizures
Other volume changes in financial assets and liabilities n.e.c.
Changes in classifications and structure
Changes in net worth due to other changes in volume of assets

Revaluation account

Revaluation account
Changes in assetsChanges in liabilities
Nominal holding gains(+)/losses(-)
    Non-financial assets
    Financial assets
Nominal holding gains(+)/losses(-)
    Liabilities
Nominal holding gains(+)/losses(-)

Balance sheet

The balance sheet presents the value of assets and liabilities of economic agents, their balancing item is the net worth. An opening balance sheet and a closing balance sheet are presented.

Balance sheet
AssetsLiabilities and net worth
Non-financial assets
    Produced assets
    Non-produced assets
Financial assets
Liabilities
 
 
Net worth

 

 

This text only reflects the opinion of its author: Francis Malherbe


 French version  





National accounts
Keynesian theory