Revenue cycling in the SNA

The results of the functioning of the modern market system are focused on the formation of incomes and are largely  determined by them. Therefore, the SNA should reflect the processes of income circulation.

The movement of income ensures the functioning of the economy. Expenses associate production with a change in assets and liabilities – accumulated funds. The main components of the circulation of income flows are considered as cash payment flows. Part of the needs of the firm, the state, and households is met by the purchase of imported goods and services. Exports are the next link that links the domestic national economic system with foreign countries. Funds received as payments that compensate for the cost of goods and services sold to foreign buyers enter the product markets. There they merge with the cash flows received from the sale of goods and services to domestic households, firms and the state represented by the government. Funds from all these sources are added to the income received by firms from the sale of products and services.

The import and export of goods and services is not the only way to connect the national economy with the outside world. In the course of the analysis, it is necessary to take into account many different kinds of international financial transactions, such as, for example, loans and credits, international purchases and sales of both real and financial assets, mutual transfers, property income and others.

According to the new 1993 SNA, income should be defined as the maximum amount that can be spent on consumption for a certain period and at the same time retain at the end of this period the capital that was at the beginning. In other words, the definition of income should indicate how much can be spent on consumption without becoming poorer.

Different income measures are used in the SNA. Most of them are calculated on a gross and net basis. With their help, you can calculate income at the time of formation, changes in some payments or receiving transfers.

Revenues are mobile. The funds are constantly in circulation, they acquire some inventory values, they participate in payments, are transferred to assets.

In the process of circulation, income goes through successively the following stages, which are reflected in the corresponding income accounts: education, distribution, redistribution and use for final consumption and savings.

In accordance with these stages, the movement of income in the reproductive cycle to characterize these processes and their results, summary accounts of income generation, primary distribution of income, secondary distribution and final use of income are developed. They reflect all the processes of formation of all the above income indicators.