II. OVERVIEW
A. Introduction
| 2.1. | This chapter provides an overall picture of the central framework of the System of National Accounts(SNA). It introduces the main categories, which are in a sense the backbone of the System, and the rules of accounting to be followed when recording the various entries. It then describes the System's accounting structure and discussessome of the ways in which the central framework may be applied flexibly, depending on specific country requirements. These presentations are based on the point of view that national accounts are an integrated system of accounts for which complete consistency is required. This is the traditional point of view on national accounting and it remains the central one. Thereafter, the chapter proceeds from a second point of view, one that regards national accounts as a set of interrelated subsystems, each of which is fully consistent internally and all of which, although differing from one another in some aspects, are compatible in a loose sense. Satellite accounts are introduced. These are constructs that are semi-integrated with the central framework. |
| 2.2. | As stated in chapter I, the central framework describes the essential phenomena which constitute economic life: production, income, consumption, accumulation and wealth. It provides an understandable and simplified but complete representation of this set of phenomena and their interrelations. |
| 2.3. | The central framework is an integrated system. That is, the same concepts, definitions and classifications are applied to all accounts and sub-accounts. For example, all dwellings are treated as assets used to produce goods and services. As a consequence, all housing services, whether sold or consumed by the owners, are included within the production boundary, and all of the corresponding income originating from the production of housing services appears in the System in the same accounts using the same definitions and classifications. |
| 2.4. | Nevertheless, integrated does not mean restricted to a single point of view. The central framework includes several points of view for example, stocks and flows, the nature of transactions and the purposes of transactions, institutional units and establishment-type units, market output, output produced for own final use and other non-market output, consumption expenditure and actual consumption. All of them are mutually consistent. |
| 2.5. | The central framework is also consistent. That is, each economic flow or stock is measured identically for the parties involved. This consistency is achieved by applying throughout the System the same concepts and definitions and also by using a single set of accounting rules for all entries in the System. Of course, the actual data coming from the accounts or statistics provided by elementary units will not be fully consistent for various reasons. In practice, achieving consistency in national accounts requires a large amount of additional work. |
| 2.6. | Integration and consistency are basic requirements originating from the fundamental characteristics of economic life and coherent accounting. These features allow the central framework to serve as a basis for the coordination of economic, and in part social, statistics. |
1. Analysing flows and stocks
| 2.7. | Basically, the purpose of a system of national accounts is to record economic flows and stocks. Economic flows can be thought of in various ways. Consider the question "Who does what?" "Who" refers to the economic agent engaged in doing something, the operator. "What" is connected with the kind of action this agent is undertaking. In a few cases, the answer to this simple question provides a good preliminary characterization of an economic flow. |
| 2.8. | But in general the question is too simple to provide even a rough economic description of a specific flow. Take the example of somebody buying a loaf of bread. In order to characterize the flow, it is necessary to consider from whom this loaf of bread is bought (a retailer or a supermarket) and what is given in exchange (a coin or a note). So the starting question is transformed into "Who does what with whom in exchange for what?" This rather simple flow involves two operators (a buyer, a seller), two main actions (a purchase, a sale), two secondary actions (a payment, a receipt) and two objects (bread, a coin or a note). Again, a complete description would require more information: at least the weight, kind and price of the bread. |
| 2.9. | The picture in the real world is still more complicated. Before this flow occurred, the seller had a certain quantity of bread in his shop; afterward he has less bread but more money. The buyer had a certain amount of money, now he has less money but some bread (before eating it). So the flow between them has changed their initial situations. This means that flows cannot be looked at in isolation; the situations before and after a flow occurs need to be considered. At those two points in time, one must ask the question "Who has what?" The baker not only has bread and currency, he also has a house with the shop, a kneading-trough, some flour, a deposit in a bank, a car, etc. In other words, he has (he owns) a certain stock of objects. The same is true for the buyer. In addition to what they are in themselves, flows modify stocks. Flows and changes in stocks are intrinsically connected. The previous question is again transformed into "Who does what with whom in exchange for what with what changes in stocks?" |
| 2.10. | However, the various ways of looking at this example have not yet been exhausted. Before the baker can sell bread, he has to bake it. He uses flour, water, electricity, a kneading-trough, etc. So, an additional question is "Who does what by what means?" What he does can also be characterized in two ways: his activity (to bake) and the result of it (a product: bread). |
| 2.11. | With respect to the buyer one can ask "Why does he buy bread?" The obvious purpose is for eating it, as food; however, it could be different for giving it to a beggar, as charity. This raises the question "Who does what for what purpose?" |
| 2.12. | Mixing all the questions together results in a rather complex combination of simple links: "Who does what by what means for what purpose with whom in exchange for what with what changes in stocks?" Answering these questions for all economic flows and stocks and operators in a given economy would provide an enormous amount of information describing the complete network of economic interrelations. However, it would require an enormous amount of basic data, which are not always available, nor complete (i.e., they cover only certain aspects of the complex chain of questions). In addition, it is necessary to organize the recording of economic flows and stocks in an intelligible way, as discussed in the next section. It will become apparent that full articulation of all the questions raised by the analysis of economic flows is not necessary. |
2. Recording flows and stocks
| 2.13. | Users' needs set certain requirements for the accounting framework. First, it should provide a picture of the economy, but the picture, to be intelligible and manageable, must be simplified. Secondly, it should faithfully represent economic life by covering all important aspects in a balanced way without neglecting or giving too little emphasis to some aspects or giving others too much prominence. Finally, it should portray all significant economic behaviour, interrelations and the results of economic activity. Although meeting these requirements is necessary, they are contradictory to a certain extent. Achieving the right balance among them is not easy. Too great a simplification can lose sight of or neglect important aspects of economic life. Too close a portrayal of reality can overburden the picture and reduce insight. Too much sophistication can lower intelligibility and mislead some users, and so on. |
| 2.14. | To meet these requirements, the System uses , first, a limited number of basic categories to analyse and aggregate certain aspects (Who? What? What purpose? What stocks?) of the very numerous elementary flows. This is explained briefly in the next part of this chapter and in detail in the relevant chapters. Secondly, the System simplifies the picture it gives of the economic interrelations by not recording systematically the "who with whom?" question; that is, it does not depict the network of flows between the various types of operators. However, the "who with whom?" relation, which is not introduced in the accounting framework, is obvious in a number of cases and recommended in practice in some others. Also, the System does not record at all the "what in exchange for what?" question; that is, it does not indicate, for example, the specific nature of the financial counterpart (currency or deposit or short-term loan, etc.) of the purchases of goods and services or the payment of taxes. |
| 2.15. | Thus, in lieu of showing the network of direct economic relations between pairs of operators, the System is structured to avoid the need to record relations between pairs of operators and to make it sufficient to record each type of relation between a given operator (or group of operators) and all the other operators indiscriminately. The dummy, or screen, accounts that accomplish this objective are presented below in paragraphs 2.152 and 2.154 to 2.160. |
| 2.16. | The fact that the System is integrated, although not fully articulated, does not reduce its consistency requirements. In effect, the purpose of the System is to get national accounts that are as consistent as they would be if they were fully articulated; each economic flow or stock should be measured identically for both parties involved. The consistency in the System is achieved by applying throughout the same concepts and definitions and also by using a single strict set of accounting rules. These accounting rules are also presented briefly in section C below and more completely in chapter III. |
| 2.17. | The recording of flows and stocks is made in accounts, each account referring to a certain aspect of economic life. National accounts may be presented in several ways. The System mainly follows the classical presentation in the form of balancing statements with incomings on one side and outgoings on the other side. The accounts of the System are described in section D of this chapter and, with more detail, in each relevant chapter. The other main way of presenting the accounts is a matrix, in which each account is represented by a row and column pair. The matrix presentation is introduced in the annex to this chapter (and is used systematically in social accounting matrices, which are discussed in chapter XX). The annex also introduces presentations in the form of diagrams and equations. |
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