Income and Expenditure Accounts

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The income and expenditure accounts can only be constructed by institutional sector. The income and expenditure accounts by institutional sector record the allocation of income, the redistribution of income, the use of income in the form of current expenditures and the resulting balance of saving (or dissaving) for a given institutional sector.

The first account—the allocation of primary income account—records the income 'earned' by any institutional sector through its role in supplying labour in the production of goods and services, as owner of the capital used in the production of goods and services or as government taxing production or providing subsidies on or for the production of goods and services.

The second account—the redistribution of income account—records the distribution of income from one sector to another in the form of current transfers. Current transfers reflect the unrequited payment or receipt of funds. Examples of current transfers include personal income taxes, donations to charitable organizations, and transfers from one level of government to another. The closing entry in the redistribution of income account is disposable income. Disposable income represents the income available to the institutional sector for either final consumption or saving.

The third account—the use of disposable income account—records the final consumption made by the sector along with its balance of saving (or dissaving).

The final account—the capital account—records sources of funds available for investment along with the sector's investment in non-financial assets. The sources of funds include the sector's saving plus its consumption of fixed capital as well as its net capital transfers received. The use of funds include the sector's gross capital formation.

The closing entry in the account is the sector’s net lending or borrowing. The sector will be a net lender if its sources of funds are greater than its use of funds. The sector will be a net borrower if its sources of funds are less than its uses of funds.

The following set of tables include estimates of income, consumption, savings, investment and net lending and borrowing by institutional sector.