VI. THE PRODUCTION ACCOUNT
A. Introduction
| 6.1. | The production account is the first in the sequence of accounts compiled for institutional units, sectors and the total economy. The incomes generated by production are carried forward into subsequent accounts so that the way in which the production account is compiled can exert a considerable influence on the System. In any case, information about production is extremely important in its own right. It is therefore necessary to spell out in some detail exactly how production is measured in the System. |
| 6.2. | Production accounts are compiled for establishments and industries as well as for institutional units and sectors. Basic concepts such as output or intermediate consumption have, therefore, to be defined and measured in the same way whether they appear in the production account for industries or sectors. Overall numerical consistency requires that the output of an institutional unit engaged in production - that is, an enterprise - should be equal to the sum of the outputs of the individual establishments of which it is composed. As these outputs include deliveries of goods or services to other establishments belonging to the same enterprise, such inter-establishment deliveries are counted as part of the output of the enterprise as a whole even though they do not leave the enterprise. |
| 6.3. | The production account for institutional units and sectors is illustrated in table 6.1. It contains only three items apart from the balancing item. The output from production is recorded under resources on the right-hand side of the account. This item may, of course, be disaggregated to distinguish different kinds of output. For example, non-market output should be shown separately from market output in the sector accounts, when possible. The inputs recorded under uses on the left-hand side of the account consist of intermediate consumption and consumption of fixed capital. Both of these may also be disaggregated. | | | Text refers to: table 6.1.  |
| 6.4. | Most of this chapter is concerned with defining and describing the three basic elements - output, intermediate consumption and consumption of fixed capital - that enter into the production account. The balancing item in the production account is value added. It can be measured either gross or net: that is, before or after deducting consumption of fixed capital:
(a) Gross value added is defined as the value of output less the value of intermediate consumption;
(b) Net value added is defined as the value of output less the values of both intermediate consumption and consumption of fixed capital. |
| 6.5. | As value added is intended to measure the additional value created by a process of production, it ought to be measured net, since the consumption of fixed capital is a cost of production. However, as explained later, consumption of fixed capital can be difficult to measure in practice and it may not always be possible to make a satisfactory estimate of its value and hence of net value added. Provision has therefore to be made for value added to be measured gross as well as net. It follows that provision has also to be made for the balancing items in subsequent accounts of the System that depend upon value added - operating surplus, mixed income, balance of primary incomes, etc. - to be measured gross or net of the consumption of fixed capital. |
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