Accounting system-example iii, Macroeconomics



Now suppose the Jam Co. manufactures some herbal chemicals and flavors which it sells partly to Extracts Co., partly to Bottling Co., some are consumed in its own production process and some are sold directly to households. Also, some households buy fruit extracts directly from the extracts company. The accounts are as follows: 

                                        Extracts Co. 


               239_Production Account.png


                              Jam Co. 

             872_Production Account.png








                                   Bottling and Distribution Co. 

                          480_Production Account.png



The consolidated production account can be drawn up in which all transactions within and among the firms are netted out: 

                                        Production Account 


                       1203_Production Account1.png



                                     Household Account 

                    1173_Production Account13.png



GNP: Market value of all final sales = 320 + 30 + 10                                             

                                                   = 360

GNI: All factor incomes earned      = 290 + 70 = 360

We can set up an input-output account for this miniature economy showing transactions within the productive sector and between the productive sector and the household sector. 

                                                        Transactions Table 


719_Production Account13.png




The inner table of first three rows and first three columns show the transactions within the productive sector, viz. sales and purchases of intermediate inputs. These are netted out from the national income accounts. The last row shows the value of labor and ownership services provided by the households to the three firms; or in other words 'value added' in the production sector; these constitute the factor incomes (GNI). The last column shows the purchases of households financed from these incomes (GNP).

Suppose a part of the output of bottled jam is sold by the Bottling Co. to the Extracts Co. which distributes it free to its workers at lunch time. How will this be accommodated in national accounts? 











Posted Date: 9/12/2012 8:24:15 AM | Location : United States

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