III. FLOWS, STOCKS AND ACCOUNTING RULES
A. Introduction
| 3.1. | This chapter deals with the basic nature of the entries in the accounts and tables of the System. First, it defines the nature of flows and stocks. These are the two basic forms in which information about the economy can be recorded in a system of national accounts, flows referring to actions and effects of events that take place within a period of time and stocks referring to a position at a point of time. Secondly, it explains the rules of accounting that underlie the recording of flows and stocks. The discussion in this chapter is a general one; definitions of specific flows and stocks and specific applications of the accounting rules appear in later chapters. |
| 3.2. | Two general characteristics of the entries in the accounts should be emphasized. The first characteristic is that the stocks and flows are exhaustive within the boundaries defined; every flow and every stock must be reflected in the accounts. The second characteristic is the rigorousness that arises because the System is integrated and consistent. The same concepts, definitions and classifications of flows and stocks are applied to all accounts, and each flow or stock is recorded consistently for the parties involved. |
| 3.3. | To help ensure consistency, the System applies rules with respect to valuation, timing and grouping of flows and stocks in implementing the quadruple entry principle, described in the two previous chapters. These rules, which are explained in more detail later in this chapter, are summarized below to provide a context for the discussion of the nature of flows and stocks, which follows immediately:
(a) Flows and stock must be recorded consistently with respect to their valuation. Entries are at current value on the market - that is, the amount agreed upon by two parties - or at its closest equivalent. The value on the market may need to be adjusted to the coverage of the flow or stock as defined in the System and expressed appropriately given the nature of the flow or stock with respect to taxes and subsidies on products, transport costs and trade margins;
(b) Flows and stocks must be recorded consistently with respect to timing. Flows are recorded at the moment of accrual within the accounting period - that is, the moment economic value is created, transformed, exchanged, transferred or extinguished. Stocks are recorded at the moment to which the account relates, typically the beginning or end of the accounting period;
(c) Individual flow and stock entries must be recorded consistently with respect to their classification, at a minimum, according to categories in the classifications of transactions, other flows and assets and according to the categories in the classification of transactors as (sub)sectors or industries. Depending on the character of the entry, a distinction should be made between resources and uses or between assets and liabilities. In the process of grouping, netting is implicit for several items, but consolidation is not advised. |
| 3.4. | It should be noted that as a result of the application of these rules throughout the System, flows and stocks are completely integrated - that is, changes in stocks can be fully explained by recorded flows. |
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