Social accounting

Social Accounting

1. SOCIAL ACCOUNTING

2. INTRODUCTION According to J.R Hicks in 1942, “Nothing else but the accounting of the whole community or nation, just as private accounting is the accounting of the individual firm”. Also know as “National Income Accounting” Method of studying the structure of the economics body. Technique of presenting information about the nature of the economy of a society with a view not merely to get an idea of prosperity or wealth. A guidelines for collective policy to influence the economy.

3. FUNCTIONAL ACCOUNTS - expressed in terms of money Production Account: Activities such as manufacturing, trading etc. Ex: public, private, state owned and partnership firms. Consumption Account: Activities such as income and expenditure account of household or personal sector. Ex: Clubs and association (NON – PROFIT MAKING INSTITUTIONS) Government Account: Activities such as outflow and inflow of government sector. Ex: Central, States and local authorities in a country. Capital Account: Shows that saving equals domestic and foreign investment. Ex: Saving is invested in fixed capital and inventories within the country and in international assets. Foreign Account: Shows the transaction of the country with the rest of the world. Ex: International movement of goods and service, transfer payment and balance of payment done internationally.

4. RECEIPT FROM PAYMENT TO PRODU-CTION CONSU-MPTION GOVER-MENT CAPITAL FOREIGN TOTAL PRODUCTION - 279 12 9 9 309 CONSUMPTION 219 - 45 15 6 285 GOVERNMENT 30 6 - 15 6 57 CAPITAL 36 - - - 3 39 FOREIGN 24 - - - - 24 TOTAL 309 285 57 39 24 714 FLOW MATRIX OF SOCIAL ACCOUNT

5. IMPORTANCE OF SOCIAL ACCOUNTING Social accounting helps us to understand the structure of the body economics. They tell us, whether the contribution of the production sector, consumption sector, investment sector or rest of the world sector is greater than the other sector in the NI accounts. It clarifies the relation between NNP at factor price and GNP at market price. It is also used by big business houses for assessing their performance and to improve their prospectus. It is a guide for Economic investigator by collecting various types of data which might be related to GNP, government expenditure on goods and service, private consumption expenditure etc. It is useful for international purposes. It helps to categorize countries into underdeveloped, less developed and developed countries.

6. DIFFICULTIES OF SOCIAL ACCOUNTING Imputation: All income and payments are measured in money. But there are goods and service which is difficult to impute in terms of money. Ex: Housewife, hobby etc. Double Counting: It arises from the failure to distinguish between final and intermediate product. Ex: Flour used by a bakery is an intermediate product and that by a household is a final product. Public Service: Estimating a number of public service in social accounts. Ex: Police, Military, health, education etc. Inventory Adjustment : It is difficult by the firms to record inventories at their original costs and not at their replacement costs. Ex: When prices rise, there are gains in the book value of inventories and when it falls there is loss. Thus it makes it difficult. Depreciation : Another problem is estimating depreciation. Ex: It is difficult to estimate the current depreciation rate of a capital asset whose life is long, say 50 years. The difficulty increase as the asset price changes.

7. Pranav Chordia 13-ec-327 THANK YOU