Indicators of income use and accumulation

After the redistribution of income, the process of their use is carried out, which is characterized by indicators of expenditure on final consumption, actual final consumption of goods and services, gross and net savings, gross accumulation and consumption of fixed capital, changes in stocks of values, land and other capital transfers, changes in net worth of capital and net lending or net borrowing. That is, the use of income is carried out by distributing disposable income for final consumption and savings. The amount of savings under the SNA is obtained in two ways: 1) as the difference between disposable income and final consumption expenditure; 2) by subtracting actual final consumption from adjusted disposable income. The categories of “final consumption expenditure” and “actual final consumption” are defined in three sectors of the economy – households, government agencies and non-profit organizations serving households. For the same sectors, indicators of disposable income and adjusted disposable income are determined.

Indicators of the use of income are reflected in two accounts – the use of disposable income and the use of adjusted disposable income.

The balancing item of both accounts is savings – that part of disposable income or adjusted disposable income that is not spent on final consumption of goods and services. Savings provide a link between the current accounts of the SNA and subsequent accounts for the accumulation of economic assets.

Changes in the value of assets, liabilities and equity made during the period are recorded in the following SNA accumulation accounts: capital account, financial account, other changes in assets account, revaluation account.

The disposable income use account shows how households, government agencies, and non-profit organizations serving households divide their disposable income between spending on final consumption of goods and services and savings.

Table 36

Disposable income utilization account

Gross disposable income is carried over from the secondary income distribution account.

Final consumption expenditure consists of the final consumption expenditures of households, government agencies and non-profit organizations serving households.

Expenditures on final consumption of households include expenditures on the purchase of consumer goods and services from the personal budget (except houses and apartments), receipts of consumer goods and services in kind, produced in subsidiary farms for own consumption; the balance of gifts received and sent abroad, as well as the balance of purchases of goods and services by residents abroad and non-residents in the economic territory of the country.

Final consumption expenditure does not include the purchase of goods and services used for intermediate household consumption and for accumulation (purchase of houses, apartments, goods for production purposes, rent of premises, equipment).

Expenditures on final consumption of public institutions are divided into expenditures that meet the individual and collective needs of the population.

Expenditures that meet the individual needs of the population cover the cost of non-market services provided by budgetary organizations to individuals in the field of education, health, physical education, social security, culture, art.

Expenditures that meet collective needs include the cost of non-market services provided by law enforcement agencies, public authorities and public administration.

The final consumption expenditure of non-profit organizations serving households is the expenditure of public organizations on services to society as a whole and to individual households, including free services provided by non-profit and budgetary enterprises and organizations to their employees.

Gross savings (HC) is the balancing item of the disposable income use account, which can be shown in gross and net terms. The amount of savings is determined by subtracting from disposable income the amount of expenditure on final consumption.

Savings are formed in the form of gross accumulation of fixed assets and changes in inventories of material working capital:

VS = VRD – VKP,

where: WFD – gross disposable income;

VKP – gross final consumption.

Gross fixed asset formation represents the funds invested by institutional units in investment objects and durable goods.

Inventories of material working capital include stocks of industrial products, agricultural products from harvested crops, fattening cattle, young livestock, work in progress and unfinished construction, unfinished overhaul and stocks of state material reserves. Change in stocks – their difference at the end and beginning of the period.

On the basis of indicators of final consumption of income, the amount of GDP used is determined by summing up the expenditures on final consumption of households, government agencies and non-profit organizations serving households, as well as the values of gross accumulation (HV) of fixed assets and changes in inventories of material working capital and net exports (PE):

GDP = HKP + HV ± CHE,

where: GCP – gross final consumption is equal to the sum of final consumption of households, government agencies, non-profit institutions;

PE – the balance of exports and imports of goods and services is equal to the difference between the amount of revenue from the sale of export goods and from the sale of services by residents to non-residents and the amount of costs for importing goods and purchasing services by residents from non-residents.

The surplus of exports and imports is added to final consumption and gross accumulation, and the negative balance is subtracted.

The distribution of adjusted disposable income between actual final consumption and savings is reflected in the adjusted disposable income utilization account.

Table 37

Adjusted disposable income account scheme

Adjusted gross disposable income of institutional units and sectors or adjusted gross national disposable income for the economy of the country as a whole is transferred to this account from the income redistribution in kind account discussed above and recorded in the resource part.

In the use of resources, the actual final consumption of goods and services and the balancing item of the account, which is savings, are shown.

The actual final consumption of goods and services, i.e. their direct use to meet the current individual needs of people and the collective needs of society, involves the institutional units of the two sectors of the economy, namely the household sector and general government.

The actual final consumption of resident households includes the cost of consumer goods and services actually received by them for individual consumption, regardless of who finances them (pays). Therefore, the actual final consumption of households is determined by summing:

1) household expenditure on final consumption, i.e. their purchase of consumer goods and services;

2) the value of consumer goods and services received by households in the form of social transfers in kind from government bodies and from non-profit organizations serving households. These transfers are quantified of the individual final consumption expenditure of government and the final consumption expenditure of non-profit organizations serving households.

The actual final consumption of general government is taken to be equal to the value of their expenditure on goods and services of collective consumption.

Obviously, the total value of social transfers received by resident households is equal to the value of social transfers paid by general government bodies and non-profit organizations. Consequently, the actual final consumption for the entire economy will be equal to the sum of the cost of final consumption of goods and services.

At the same time, the balancing item “Savings” should be identical in scope and value in the accounts for the use of disposable income and the use of adjusted disposable income, since social transfers in kind equally affect the indicators of disposable income and final consumption in these accounts.