1. System of National Accounts Basic Concepts
National Academy of Statistical Administration
Ministry of Statistics and Programme Implementation
Central Statistics Office

2. National Accounts - Basic Concepts
System of National Accounts (SNA), 2008
Jan. 2011
System of National Accounts (SNA) Historical Development SNA, 1968 SNA,1993 SNA,2008 SNA
SNA aims to provide a comprehensive, coherent, and consistent picture of the economy that reflects
all transactions
taking place between the agents that together constitute an economy
and other economic flows in an accounting period
and the opening and closing stocks of assets and liabilities
Integrated Framework for Socio-Economic Analysis 2
PDOS-SIAP 2

3. National Accounts - Basic Concepts
SNA -Integrated Framework for Socio-Economic Analysis
Jan. 2011
Resources: Human; Natural; Produced; Financial
Economic Life: Production; Distribution
Production- Goods and Services; Income; Residuals
Distribution- Final Consumption; Accumulation; Exports
Presenting Stock and Flows - Format
Stock of resources (opening)
Production
Consumption
Capital formation, net exports
Other changes in volume / prices
Stock of resources (closing) 3
PDOS-SIAP 3

4. produced, natural, financial
OPENING STOCK OF RESOURCES
Human
Produced
Natural
Financial
PRODUCTION
Income
Goods & Services
Residuals
Intermediate consumption
Final Consumption
Accumulation
Exports
DISTRIBUTION & USE
CHANGE: human
CHANGE:
produced, natural, financial +
Other changes
(volume, price)
CLOSING STOCK OF RESOURCES
Human
Produced
Natural
Financial

5. What constitutes National Accounts?
National Accounts - Basic Concepts
SNA Introduction
Jan. 2011
What constitutes National Accounts?
The residents mostly earn their income from production carried out in the economy
Thus, income of all the residents is mainly generated from production activity of goods and services in the economy
Income, thus generated, is spent for purchase of goods and services produced in the economy or imported
either for final consumption
or saving for accumulating wealth
National Accounts provide a quantitative description of all these processes and their inter-linkages 5
PDOS-SIAP 5

6. System of National Accounts (Contd.)
National Accounts - Basic Concepts
SNA Introduction
Jan. 2011
System of National Accounts (Contd.)
SNA provides a framework for systematic presentation of estimates of macro-economic aggregates relating to national income and wealth
Stocks of economic assets represent ‘wealth’  
The SNA also has provision of recording ‘other flows’
caused by events like war, natural calamity, and scientific discovery and changes in general price level
affecting the stock of ‘economic’ assets 6
PDOS-SIAP 6

7. Structure of SNA SNA - Introduction Answers to the following questions
Who? : actors in an economy
Institutional units and establishments
What? : flows and stocks
economic activities and assets and liabilities
How? : macro-economic framework and accounting rules
national accounting identities and sequence of accounts
Why? : purpose
classification by purpose of expenditure
provides an overview of the conceptual framework of SNA

8. Institutional Units-Constituents of an Economy?
National Accounts - Basic Concepts
Structure-Who?- Actors: Institutional Units/Establishments
Jan. 2011
Institutional Units-Constituents of an Economy?
All institutional units residing in the economic territory of a country during accounting period constitute its economy
Institutional unit is an economic entity that is capable of owning assets, incurring liabilities, carrying out economic activities, taking decisions on all aspects of economic life, engaging in transactions with other entities
All economic transactions take place only through institutional units
Institutional Sectors: Corporations - Financial ,Corporations - Non-financial, Government, Non-Profit Institutions serving households (NPISHs), Households (includes unincorporated enterprises) 8
PDOS-SIAP 8

9. National Accounts - Basic Concepts
Who? - Constituents of an Domestic Economy
Jan. 2011
Residence
Definition: The economic territory in which the institutional unit has its centre of predominant economic interest
The definition of Domestic Economy is based on the concept of Residence. And not Currency or Nationality
All resident units constitute the domestic economy
For national accounts, Rest of the World (RoW) consists of all Institutional units
not belonging to the domestic economy
but have some transactions with resident units
PDOS-SIAP

10. Economic Flows and Stocks
What ? - SNA aims to describe economic flows and stocks
Economic Flows and Stocks
The SNA accounts consist of tables and balance sheets that register (in monetary terms)
the economic actions or events (flows) that take place within a given period of time
Flows (Transactions) are captured during a period of time
and
the effect of these events on the stocks of (economic) assets and liabilities at the beginning and end of that period
Stock of resources are measured at a certain point in time
Within SNA boundaries

11. What?- Economic flows and Stocks (Contd.)
Economic Flows- reflect creation, transformation, exchange, transfer or extinction of economic value ; reflect creation, transformation, exchange, transfer or extinction of economic value undertaken by institutions
Stocks of (Economic) Assets- are a position in, or holdings of non-financial (produced or non-produced) assets , financial assets and liabilities at a point in time Economic asset is subject to ownership rights and used in some kind of economic activity or as a store of value Excluded: Consumer durables and natural resources that are not owned (Environmental assets)

12. What?- Two Types of Economic flows
Transactions – interaction by mutual agreement between institutional units :
(a) With counterpart – exchange something for something
(b) Without counterpart – transfers something for nothing
Other flows – change in value of assets and liabilities without transaction caused by (a) volume change, (b)level and structure of price
Types of Transactions: Transaction in goods and services: Two kinds: (i) Produced goods and services or (ii) Non-Produced assets Distributive transactions: Two kinds: (i)Distribution of income generated (ii)Transfers Transactions in Financial assets and liabilities

13. Supply and Use of Products
What?- Transactions in products (Goods and Services)
Supply and Use of Products
Supply (Gross Value of Output) of goods and services produced in the domestic economy (GVO) and imports (M) are used as
Intermediate Consumption (IC)
Final Consumption of the residents
Households Final Consumption Expenditure (HFCE)
Government Final Consumption Expenditure (GFCE)
Final Consumption Expenditure of the NPISHs
Gross Domestic Capital Formation (GDCF)
Gross Fixed Capital Formation (GFCF)
Change in Inventories (CII)
Acquisition less disposal of valuables
Consumption of Fixed Capital (CFC)
and exports (X)

14. SNA Framework- Supply and Use Tables
How? SUT
SNA Framework- Supply and Use Tables
In the SNA framework, Supply and Use Tables (SUTs) are the first set of global tables
These are based on the commodity balance identity:
GVOmp + M = supply ≡ use = IC + PFCE + GFCE + GFCF + CIS
+ acquisition less disposal of valuables + X
… …. [1]
As many commodity balance identities as the number of product categories used in national accounts compilation
SUTs are a combined presentation of all these identities that help in
verification and reconciliation of the estimates and
estimating the missing values

15. Distribution of Income from ‘Production’
What? Distributive Transactions
Distribution of Income from ‘Production’
Compensation of employees
Wages and salaries; Employers’ social contributions
Taxes on production and imports
Taxes on products; Other taxes on production
Subsidies
Subsidies on products; Other subsidies on production
Property income
Investment income
Interest, Dividends, Reinvested earnings on FDI, etc.
Rent

16. What? - Distributive Transactions
Transfers
Current transfers (other than social transfers in kind)
Current taxes on income, wealth, etc.
Net social contributions
Social benefits other than social transfers in kind
Other current transfers
Social transfers in kind
Adjustment for the change in pension entitlements
Capital transfers
Boundaries in the SNA
Production Boundary
Consumption Boundary
Asset Boundary

17. SNA Production Boundary
What? Boundaries
SNA Production Boundary
includes
production of all goods and individual or collective services that
are supplied to other units or
intended to be so supplied
including the production of goods and services used up in the process of producing such goods and services;
own-account production of all goods that are retained by their producers for their own
final consumption or
gross capital formation
own-account production of housing services and domestic services produced by employing paid domestic staff

18. What? - Boundaries Consumption Boundary
Consumption of goods and services is the act of completely using them up
in a process of production (intermediate consumption) or
for direct satisfaction of human needs / wants (final consumption)
The second activity represents final consumption and includes use of goods and services for both
individual needs - acquired by a household and used to satisfy the needs or wants of members of that household; and
collective human needs - service provided simultaneously to all members of the community or a section of the community
These are provided only by the government

19. What? - Boundaries Assets Boundary
All that has a life of more than a year and qualifies as
economic assets i.e. store of value
on which ownership right can be established and
the economic owner derives benefits by holding or using
including
all non-financial assets whose economic owners are residents of the economy
all financial claims, shares or other equity in corporations of the residents plus gold bullion held by monetary authorities as a reserve asset
fall in the assets boundary of the SNA

20. SNA Framework- Identities, Accounts and Valuation SNA framework
SNA is founded on the macro-economic framework that gives a set of identities forming basis of SNA sequence of accounts measuring economic flows and stocks
SNA framework is based on the premises that all goods and services produced in domestic economy are put to “use”
circular flow of income and expenditure of residents and non-residents participating in transactions in the economy
The framework establishes the equivalence of
supply and use of goods and services produced
the value of production of goods and services, income generated in production and expenditure on final products

21. Expenditure on intermediate & capital g&s
Government
Households
Final Consumption
Income
Govt. Expenditure
Saving
Investment
Imports
Exports
Circular Flow of Income and Expenditure
[Showing also Leakages: Saving, Taxes, Imports; and Injections: Investment, Government Expenditure, Exports]
Taxes
Rest of the World
Enterprises
Expenditure on intermediate & capital g&s
Financial
Market
Taxes

22. How? - Output, Production
“Enterprises” produce goods and services (g&s), using g&s produced by other enterprise in the domestic economy or RoW or by themselves as intermediate consumption (IC)
The receipts of the enterprises from sale (or value of goods and services otherwise disposed) of the produced goods and services represent the gross value of output (GVO)
Production
In the SNA, the measure of production (in ‘gross’ terms) is Gross Value Added (GVA). Defined as
GVA = GVO – IC ……[2]
where GVO stands for Gross Value of Output, IC for Intermediate Consumption

23. Gross Domestic Product (GDP)
How? - Gross Domestic Product
Gross Domestic Product (GDP)
GDP is a measure in monetary terms of production of all goods and services counted without duplication, as sum of GVA of all resident producer units within the economic borders of country during a given period of time and taxes less subsidies on products
GDP = ΣGVA + taxes less subsidies on all products (t-s)
GDP includes Illegal & concealed production, Production of goods for own consumption, Production of non-market services by government and NPISH, Services of own occupied dwelling units of households
GDP excludes social activities, cultural activities and unpaid volunteers, do-it-yourself decoration, maintenance and small repairs to durables and dwellings by households

24. Gross / Net Domestic Product (GDP / NDP)
How? – Gross vs Net
Gross / Net Domestic Product (GDP / NDP)
The Capital Stock (Produced resource in the form of buildings, infrastructure, machinery and equipment) attracts Consumption of Fixed Capital (CFC) in the process of production
Net Domestic Product (NDP) is obtained from GDP by subtracting the CFC
NDP = GDP – CFC
GDP = NDP +CFC
Similarly,
NVA= GVA - CFC

25. How? - Circular Flow Generation of Income
GVA resulting from the process of production is the income generated, which in turn is distributed to
households as
Compensation of Employees (CE) and
(gross) Operating Surplus (OS) (en route financial market)
Mixed Income (MI): mix of CE and OS, and
government as production taxes (net of subsidies), composed of
Taxes on products and import taxes (net of subsidies) and
Other production taxes (net of subsidies)

26. Primary Income - from recipients’ perspective
How? Generation of Income
Primary Income - from recipients’ perspective
Primary incomes: incomes accruing to units for their
involvement in or
for ownership of assets used in
production processes
Households receive primary income from producers of goods and services as
Compensation of employees (CE) and
Property income (PI) from
lending of financial assets
renting of natural resources owned by them
or mixed income (MI)

27. Primary Income - from recipients’ perspective (Contd.)
How?- Primary Income
Primary Income - from recipients’ perspective (Contd.)
Government receives
Taxes less subsidies on products and imports (duties)
Property income
Primary income is also received from (and paid to) RoW
For an institutional unit, Balance of Primary Income is
total value of the primary incomes receivable less
total of the primary incomes payable
At total economy level, it is called Gross National Income GNI = primary income generated in the domestic economy (GDP) + (net) primary income receivable from RoW
NNI = GNI – CFC
Per capita income = NNI / Mid year population

28. Secondary Distribution of Income
How? Distribution of Income
Secondary Distribution of Income
Out of the balance of primary income (gross), the institutional units may pay and/or receive current transfers:
transactions in which an institutional unit provides part of primary income to another unit without receiving from the latter any thing in return as a direct counterpart
After making the current transfers, the institutional units are left with Gross National Disposable Income (GNDI)
GNDI = GNI + Current Transfers receivable
- Current Transfers payable

29. How? - Circular Flow - Use of Income
The GNDI the available income is spent by the households, government and NPISHs on final consumption
The balance is Saving
Saving = GNDI- Final Consumption Expenditure
which then flow to the financial market
Enterprises borrow from the financial market for acquisition of assets (capital formation)

30. Valuation of Goods and Services
How? Valuation
Valuation of Goods and Services
Taxes and subsidies on products bring about difference in prices of products at different stages – production, distribution and sale resulting in different perception of prices for same transactions between users and producers
Valuations recommended in 2008 SNA:
‘basic prices’, ‘producers prices’ and ‘purchasers prices’
Purchasers’ price
Less trade and transport margins
Equals producer's prices
Less taxes less subsidies on products payable/receivable by their producers
Equals basic prices

31. How? - Valuation Market Prices
Prices paid by consumers are different from what the producers perceive as their receipts, because:
the taxes on products that are passed on to government are not receipts of the producers
trade and transport margins, which forms part of the traders and transporters income
Thus, in the National Accounts:
Use of products are recorded at purchasers’ prices
Supply (output) of products are recorded at basic prices

32. How? - Valuation GVA at basic price GVAbp = GVObp - ICpurp
An enterprise’s earnings from production is the GVA at basic prices
= Receipts from sale of its products
minus (taxes on products –subsidies on products)
= Gross value of output at basic prices (GVObp)
minus Intermediate Consumtion (input) at purchasers prices (ICpurp)
= Gross Value Added at basic prices (GVAbp )
GVAbp = GVObp - ICpurp
Which gets distributed as
CE + OS + MI + other production (t-s)
Where, CE is compensation of employees, OS is gross operating surplus and MI is mixed income - mix of CE and OS

33. How? - Valuation GDP - at Market Prices
GDP the measure of production is always at market prices
GDP at market prices is defined as:
GDPmp= ΣGVAbp + taxes less subsidies on all products (t-s)
GDPmp≡ GVObp – IC + (t-s)on products + (t-s)on imports … [2]
GDPmp represents the primary income generated from the production undertaken within the domestic economy. Taxes on products is a part of income. The above equation is in fact the Production Account

34. Commodity Balance Identity
How? Identities
Commodity Balance Identity
The equivalence of supply and use of goods and services lead to the commodity balance identity:
Output at purchasers’ prices is
GVOpurp ≡ IC + PFCE + GFCE + GFCF + CII
+ acquisition less disposal of valuables
+ X – M …. …. …[1]
exports and imports are both valued at f.o.b., which excludes taxes and subsidies on imports
Note that PFCE stands for Private Final Consumption Expenditure, which includes final consumption expenditure of Household and NPISHs

35. Expenditure-side Identity
How? Identities
Expenditure-side Identity
GDPmp ≡ PFCE + GFCE + GFCF + CII
+ acquisition less disposal of valuables + X – M
This is the expenditure-side identity
GDPmp≡ Σ GVAbp + taxes less subsidies (t-s) on products (including on imports)
= Σ GVAprodp + taxes less subsidies (t-s) on imports
Sum of GVA at producers price includes taxes less subsidies on domestic products only. Thus taxes less subsidies on imports is to be further added to get GDP at market price

36. How? - Identities Income-side Identity On the income-side,
GDPmp ≡ (CE + OS + MI) generated in domestic economy
+ (t-s) on products + (t-s) on imports … [3]
Income of the residents of the economy
≡ primary income generated within the economy (GDPmp) + (net) primary income earned from abroad (RoW)
≡ CE generated in (paid by) the domestic economy
+ OS and MI generated in the domestic economy
+ (t-s) on products + (t-s) on imports
+ CE from RoW (net) + PI from RoW (net)
≡ Gross National Income (GNI) …… …….[4]

37. Gross National Disposable Income
How? Identities
Gross National Disposable Income
From the income, taxes on income and wealth are paid both to the governments of the country and abroad. The Government similarly earns such taxes both from the domestic economy as well as abroad
Further, there are current transfers made both within country and across the border. Thus,
Gross National Disposable Income (GNDI)
≡ GNI - net taxes on income and wealth payable to RoW
+ net current transfers receivable from RoW ….[5]
[Note that the transfers within the economy get cancelled out]

38. How? - Identities Gross Saving
(Gross) Saving of the domestic economy is defined as
Gross saving = GNDI minus (PFCE + GFCE) [6]
Using the expenditure- and income-side identities, this reduces to
Gross Saving = Gross Domestic Capital Formation
+ acquisition less disposal of valuables
+ acquisition less disposal of non-produced non-financial assets
- (net) Capital transfer receivable
+ net lending (to RoW) [7]

39. Main SNA Indicators – A sum up
How? - Accounts
Main SNA Indicators – A sum up
GDP
plus (net) primary income from RoW
= GNI
plus (net) current transfer from RoW
plus (net) taxes on income and wealth from RoW
= GNDI
minus final consumption expenditure
= Gross Saving
plus (net) capital transfer from RoW
minus gross capital formation
minus acquisition less disposal of valuables from RoW
minus CFC
= Net lending / borrowing from /to RoW 39 39

40. SNA Framework- Sequence of Accounts
SNA framework reflects economic processes in sequence of accounts that
core of accounting framework, provides overview of the economy
structured by institutional sectors (incl. ROW) and three sub-sets of accounts
Three subsets of Accounts are:
I. Current accounts
Production Accounts … … … ← identity [2]
Income Accounts
i. Generation of income account … … ← identity [3]
ii. Allocation of primary income account … … ← identity [4]
iii. Secondary distribution of income account … ← identity [5]
iv. Use of income account … … ← identity [6]
II. Accumulation accounts … … ← identity [7]
III. Balance sheet 40 40

41. Transaction accounts How? - Accounts
Transaction accounts - All the accounts, except Balance Sheets and the Other Changes in Assets Accounts, consist of values of transactions and are linked to the basic economic activities of
production
income generation and distribution
consumption and
capital formation

42. General Features of Accounts
How? - Accounts
General Features of Accounts
Like business accounts, each of these accounts of SNA are organised as a sequence of T-accounts and thus have two sides, called
‘resources’ and ‘uses’ for current accounts
‘changes in liability & net worth’ and ‘changes in assets’ for accumulation accounts
‘liabilities & net worth’ and ‘assets’ for Balance sheet
Entries made in these accounts are based on the principle of double accounting, thus permit checking consistency
The accounting structure - applies to all institutional units / sub-sectors / sectors and total economy. However, all transactions are not relevant for all sectors

43. Links between Accounts
How? - Accounts
Links between Accounts
Among the transaction accounts: The balancing item (in the uses side) of one account is carried forward as the first item (in the resources) of the next account
The changes in assets and liabilities brought about by transactions (and other changes) are reflected in the Balance Sheet
The sequence of accounts thus provides an integrated view of the entire economy

44. Links between the Accounts
How? - Accounts
Links between the Accounts
Transaction Accounts
Production Account
GDP
Income Accounts
savings
Opening
Balance
Sheet
Capital Account
(non-financial
assets)
Other
Economic
flows
Closing
Balance
Sheet
Net lending/borrowing
Financial Account
(financial assets/
liabilities)

45. 45 45 Integrated Transaction Accounts of 2008 SNA – in Brief Uses
Integrated Transaction Accounts of 2008 SNA – in Brief
Uses
Resources
Production Account
Intermediate Consumption (P2)
Output (P1), of which:
Market output (P11);
Output for own final use (P12) and
Non-market output (P13)
(Taxes-subsidies) on products & imports (D21 – D31)
GVA / GDP (B1)
Generation of income Account
Compensation of employees (D1)
(Taxes – subsidies) on production & imports
Mixed income(B3) +Operating surplus (B2)
Primary Distribution of Income
Mixed income (B3) +Operating surplus (B2)
(Taxes – subsidies) on production & imports (D2–D3)
Property Income (D4)
Gross National Income (B5)
Secondary Distribution of Income
Taxes on income & wealth payable (D5)
Taxes on income & wealth receivable (D5)
Social contributions & other social benefits payable (D6)
Social contributions & other social benefits receivable (D6)
Other current transfers payable (D7)
Other current transfers receivable (D7)
Gross Disposable income (B6)
Use of disposable Income Account
Final Consumption Expenditure (P3), of which:
Household FCE;
Government & NPISHs FCE
Adjustments for hhds’ pension funds (D8)
Gross Savings (B8)
changes in assets
changes in liability & net worth
Capital Account
Gross Fixed Capital Formation (P51g)
Capital transfers receivable minus
Change in Inventories (P52)
capital transfers payable (D9)
Acquisition less disposal of valuables (P53)
Acquisition less disposal of non-produced non-financial assets (NP1, NP2 & NP3)
Minus CFC (P51c)
Net lending / borrowing (B9)
Financial Account
Net acquisition of financial assets (F1 to F8)
Net incurrence of liabilities (F1 to F8) 45 45

46. Changes in Liabilities and Net Worth
Other Volume Change
Changes in Assets
Changes in Liabilities and Net Worth
Addition/reduction of non financial (produced and non-produced) and financial assets due to other changes in volume of assets
Addition/reduction due to other changes in volume of liabilities
Change in net worth due to other changes in volume of assets (holding gain/loss)

47. Changes in Liabilities and Net Worth
Revaluation Account
Changes in Assets
Changes in Liabilities and Net Worth
Addition/reduction of non financial and financial assets due to price change
Addition/reduction due to price change of financial liabilities
Change in net worth due to price change (holding gain/loss)

48. Changes in Balance Sheet
Net Acquisition of Assets
Net Lending and addition to Net Worth
Change in value of non financial assets
Change in value of financial assets
Change in financial liabilities
Change in net worth
Due to transaction
Volume change
Holding gain

49. Balancing Items in Accounts
How? - Accounts
Balancing Items in Accounts
Balancing item
the sum of resources (right side) minus the sum of uses (left side) in each of the current accounts
shown on the left side (uses side) of the account
Each account has a balancing item that is significant as a macro-economic aggregate like
gross / net domestic product (GDP / NDP)
gross / net national income (GNI/ NNI)
gross / net disposable income (GNDI/NNDI)
saving
net lending/borrowing

50. What is Estimates at Constant Prices
The value of a product or group of products, valued for the current period using its own prices from an earlier period (which are kept constant)
At the micro level:
At the aggregate level:
the total value of a group of products in period t where each item is revaluated at its own prices of period 0 (period 0 is kept constant for a period of time)
Where: is the price of item i in base period 0
is the quantity of item i in period t
is the total value in period t measured at the prices of base period 0 50 50

51. What is Estimates at Constant Prices
Changes over time in a constant price time series reflects only changes on quantities (and quality)
Thus it is an aggregated volume measure
expressed in money terms
which thus is additive
It is not value of a product or group of products adjusted for changes in the general price level. Can be estimated by-
Revaluation : Multiply the quantity or volume at time t by price at time 0
Deflation : Divide the GO at current price by price relative or price index with base 0
Extrapolation : Multiply the value at time 0 with volume relative or volume index 51 51

52. Thanks