NATIONAL INCOME ACCOUNTING

National Income Accounting is the subject matter that deals with the estimation of national income and the related macroeconomic variables. It prepares and presents national income data in such a manner that we are able to judge performance of the economy. National Income Accounting is based on Double Entry System of business accounting. According to this technique, each transaction is supposed to have two aspects i.e. credit aspect and debit aspect.

Significance of National Income Accounting

1) Estimation Of National Income – National income can be easily estimated through national income accounting.
2) Structure of Economy- National Income Accounts give knowledge of the structural changes in the economy. We can easily know the share of the particular sector in the national income.
3) Formulation of Economic Policies- The government of every country uses national income accounts in the formulation of economic policies. The government formulates its fiscal and monetary policies using data of national income accounts. They also show the cause and effect relationship between different economic activities.
4) Helpful in International and Inter-regional Comparison- National Income Accounts facilitate comparison of income, consumption and capital formation of different countries as well as different regions within the country.
5) Record of Basic Economic Functions- National Income Accounts serve as record of basic economic functions i.e. production, consumption and capital formation.
6) Importance for Economic Analysis- National Income Accounts is helpful in analyzing the functioning, growth and structure of the economy. It serves as a barometer of economic growth. This helps in the analysis of factors which influence economic growth.
 

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