Principals of national account are built on?

Answer 1

The principles of national account are built on certain foundations, which include:

1. Systematic Recording: National accounts are based on the systematic recording of economic transactions and activities that occur within the boundaries of a country. These transactions include production, consumption, investment, and external trade.

2. Double-entry Bookkeeping: National accounts follow the principle of double-entry bookkeeping, which ensures that every economic transaction is recorded with an equal and opposite entry in the accounts. This principle helps in maintaining accuracy and consistency in the accounting process.

3. Accounting Period: National accounts are prepared for specific accounting periods, such as a year or a quarter. By determining the time frame, comparisons and analysis of economic activities can be made over a specific period.

4. Aggregation: National accounts aggregate individual economic units and transactions to provide a comprehensive picture of the entire economy. This includes summarizing transactions of households, businesses, government, and the rest of the world in a coherent framework.

5. Production Approach: National accounts use a production approach to measure economic activity. This involves measuring the value of goods and services produced by various sectors of the economy, such as agriculture, manufacturing, and services.

6. Income Approach: National accounts also adopt an income approach to measure economic activity. This approach focuses on measuring the income generated by various sectors through their productive activities, such as wages, profits, and rents.

7. Expenditure Approach: National accounts use an expenditure approach to measure economic activity. This approach examines the spending patterns of households, businesses, government, and the rest of the world on goods and services produced within the country.

8. International Standards: National accounts are based on international standards, such as the System of National Accounts (SNA) developed by the United Nations, which provides guidelines on the concepts, definitions, and methodologies for compiling national accounts.

Overall, national accounts aim to provide a comprehensive understanding of the economic performance, structure, and interrelations of a country's economy. These principles ensure consistency, comparability, and reliability in measuring and analyzing economic data.