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National Accounting Concepts

National Accounting Concepts

Why knowing about national accounting concepts is important?

National income data are of great importance for the economy of a country. In modern days they are regarded as the accounts of an economy, which are known as social accounts.

Social accounts tell us how the aggregate of a nation’s revenue, output and product result from the income of different individuals, products of industries and transactions of international trade.


national accounting concepts


National policy formulations:

The computation of national income forms a basis for a nation to develop its policies for important spheres of action such as employment policies, monetary policies and fiscal policies that determine the growth of an economy.

These figures enable us to know the direction which the industrial output, investment, saving etc. take and proper measures can be adopted to bring the economy on the right path.


Facilitates Planning:

  1. Gross Domestic Product

  2. Gross National Product

  3. Net Domestic Product

  4. Net National Product

  5. Per Capita Income

  6. Disposable Personal Income


Concepts of Natioanl Income


All these factors comprise the national income and indicate the money value of the flow of goods and services available annually in an economy.

Also this statistics helps a nation for proper economic planning. The per capita income refers to the earning capacity of individuals in an economy and more the per capita income, higher is the economic welfare of a country.

Uncontrolled population growth and unemployment are major reasons for low per capita income. The wealth cannot be evenly distributed owing to high birth rates and low mortality rates and making the ends meet with the available scant resources becomes a major problem for developing countries.


Distribution of income

From the data pertaining to wages, rent, interest and profits, we learn of the disparities in the incomes of different sections of the society. Similarly the regional distribution of income is revealed.

It is only on the basis of these that the government adopts measures to remove inequalities in income distribution and attempts at regional equilibrium.

There have been differences of opinion regarding ‘nation’ in the concept of national income.

In the calculation process, the term ‘nation’ has to be defined exactly as to whether it is the geographical entity of the country to be taken up for computing national income or the incomes earned by the nationals including those residing abroad.

Further, since everything has to be equated to the money value, services produced in the economy out of love for humanity cannot be brought under the term national income.

Besides, there is an overlapping of occupations, especially in the rural sector of certain countries, which makes it difficult to know about incomes from various sources.