National Accounting 21/05/2019 Dr. Amr Nazieh.

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National Accounting 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Overall Examples: (1) The following are related to the different sectors of the national economy: 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Intermediates Indirect tax Gifts Marketable value of output Sector 14 -- 4 40 Agriculture 6 16 Minerals 20 100 Conversion indust. 10 Construction Electricity 2 12 Transport 8 24 Wholesale Bank Others 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Further information : (1) Value of foreign factors of production not resident, shared in national production 16 millions. (2) Value of income due to local factors of production, shared in production of foreign countries 6 millions. (3) Depreciation of the national capital 10 millions. 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Required :- 1-The calculation of the gross local production according to the factor costs. 2- The calculation of the gross national production according to the factor costs. 3- The calculation of the net national production according to the factor costs 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Solution:- (1) Calculation of the gross local production according to the factors costs = National production at market price (after exclude any intermediates) (-) indirect taxes (+) production subsidiary ( gifts or donations). 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting For Agriculture for example: = (40 – 14) – 0 + 4 =£E 30 Therefore : Gross local production according to the factors costs = (252 – 104) – 46 + 18 = £E 120 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Total domestic production at factor costs (5) = (1-2-3+4) Gifts (4) Indirect tax (3) Intermediates (2) Marketable value of output (1) Sector 30 4 -- 14 40 Agriculture 6 --- 16 Minerals 46 20 100 Conversion indust. 10 Construction Electricity 2 12 Transport 8 24 Wholesale Bank Others 120 18 104 252 Total 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting (2) The calculation of the national production to factor costs = Total domestic production at factor costs (£E120) (+) Income to national factors of production, shared in foreign countries (£E6). (-) Income to foreigners, not resident in Egypt (£E 16) =£E 110 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting (3) the calculation of the net national production at factor costs= Total national production at factor costs (£E 110) (-) Deprecation of national capital(£E 10) = £E 100 millions. 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Overall Examples: (2) Suppose that a three production units, K,L and M are existing in a certain economy — Products of each unit are considered as an intermediate product to the following unit. The following data are extracted from the records of the previous units regarding the year 2003 (.000): 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting M L K Items 16000 10000 ---------- Purchases from other entities 200 400 ------------- Beginning inventory 1000 1200 ------------ Ending inventor 2400 Sales 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Required :- Determine the national production 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Solution:- (1) Solution according to the value add method Unit K:- Factors of production = Purchases - Changes in inventory = zero Value added = 10000 – zero = £E 10000 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Unit L:- Factors of production = Purchases - Changes in inventory = 10000 – (1200-400) = £E 9200 Value added = 16000 – 9200 = £E 6800 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Unit M:- Factors of production = Purchases - Changes in inventory = 16000 – (1000-200) = £E 15200 Value added = 2400 – 15200 = £E (12800) 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Value added for all units:- = 10000 + 6800-12800 = £E4000 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting (2) Solution according to the final national production method The final production will be determine according to the value of sales to final consumer and the total change in the inventory. 21/05/2019 Dr. Amr Nazieh

Ch 2: The basic concepts of the National Accounting Final production of all units = Final sales –(changes in inventory) = 2400 + (1200 + 1000) – (400 + 200) = £E 4000 21/05/2019 Dr. Amr Nazieh