The Meaning of National Accounts in International Economics

A Look at National Account Systems and Macroeconomics

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Moffatt, Mike. "The Meaning of National Accounts in International Economics." ThoughtCo, Nov. 9, 2015, Moffatt, Mike. (2015, November 9). The Meaning of National Accounts in International Economics. Retrieved from Moffatt, Mike. "The Meaning of National Accounts in International Economics." ThoughtCo. (accessed September 25, 2017).
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National accounts or national account systems (NAS) are defined as a measure of macroeconomic categories of production and purchase in a nation. These systems are essentially methods of accounting used to measure the economic activity of a country based on an agreed upon framework and set of accounting rules. National accounts are specifically intended to present specific economic data in such a way as to facilitate analysis and even policy-making.

National Accounts Requires Double-Entry Accounting

The specific methods of accounting used in national account systems are characterized by a completeness and consistency that is required by detailed double-entry bookkeeping, also known as double-entry accounting. Double-entry bookkeeping is aptly named as it calls for every entry to an account to have a corresponding and opposite entry into a different account. In other words, for every account credit there must be an equal and opposite account debit and vice versa.

This system utilizes the simple accounting equation as its basis: Assets - Liabilities = Equity. This equation holds that the sum of all debits must equal the sum of all credits for all accounts, else an accounting error has occurred. The equation itself is a means of error detection in double-entry accounting, but it will only detect value errors, which is to say that ledgers that pass this test are not necessarily free of error.

Despite the simplistic nature of the concept, double-entry bookkeeping in practice is a tedious task requiring great attention to detail. Common mistakes include crediting or debiting the incorrect account or simply confusing the debit and credit entries entirely.

While national account systems hold in common many of the same principles of business bookkeeping, these systems actually based in economic concepts.

Ultimately, national accounts are not simply national balance sheets, rather they present a comprehensive account of some the most complicated economic activities.

National Accounts and Economic Activity

The systems of national accounting measure output, expenditure, and income of all major economic players in the nation's economy from households to corporations to the nation's government. The production categories of national accounts are usually defined as output in currency units by various industry categories plus imports. Output is usually approximately the same as industry revenue. The purchase or expenditure categories, on the other hand, generally include government, investment, consumption, and exports, or some subsets of these. National account systems also incorporate measurement of the changes in assets, liabilities, and net worth.

National Accounts and Aggregate Values

Perhaps the most widely recognized values measured in national accounts are the aggregate measures like gross domestic product or GDP. Even among non-economists, GDP is a familiar measure of the size of the economy and aggregate economic activity. Though national accounts provide a plethora of economic data, it is still these aggregate measures like GDP and, of course, their evolution over time that is of most interest to economists and policymakers as these aggregates concisely present some of the most important information about a nation's economy.