Social accounting or preparation of social accounts has assumed great Importance in modern times. This is so because economic theory is being increasingly applied for the solution of practical problems. If study of economics is to be fruitful. now ledge of social accounts is absolutely essential. In the absence of a dear picture if the working of the economy, an economist i~ seriously handicapped,” gh In practical advice to the government or to businessmen. It is only with the of ‘1 ace unto ing that one can clearly trace the effects of changes in one section of on its other sections. Nature of economic relationship is very complex present-day world, and therefore, no student can dearly the principles of having in his mind a dear picture of the economy which only can give.
What is Social Accounting?
As we have said above. the nature of economic relationship has become every complicated in modern times. We have also said that it is the business of social accounting to make the understanding of this relationship easy and simple. But what precisely is social unting’?’Social accounting ‘ i~ a tcnn which is applied to the description of the various types of economic activities that arc taking place in the community in a certain institutional frame-work. In social accounting, we arc concerned with statistical classification uf the economic that we arc able to understand easily and dearly the operation of the economy .” a whole. In the words or Stone and Murray. “The term social accounts i general sense to denote all organized arrangement of all II imp ted. in an economic system. In such a system distinctions are drawn In social accounting, a transactor is supposed to keep a set of three accounts in which transactions arc entered: (CI) In the first account, incomes and outgoings relating to a productive activity of the transactor are brought together. The difference between the two indicates the profit or the gain. t/J) The second account seeks to show how this profit and any other income that accrues to the transactor arc allocated to different uses. The excess of income over outlay i~ the measure or savings. (c) The third account shows how this saving and any other capital funds arc used to finance the capital expenditure or to give loans to other transactors. These accounts show the assets and liabilities of he person concerned at the beginning and at end of the accounting period. Since in the economy as a whole. the transactor-. arc numerous . they arc grouped in o sectors. the sector, of same type arc consolidated. The sector iK nil the units in a system of l account.
on knowledge with those dealing with accounts that private accounting is done on the method of double entry book-keeping. That is. each transaction i~ recorded twice in the OIlOI-Sof the businessman. For instance, a cash sale will he entered once in the appropriate ledger account as a credit to the good sold, and it is again entered in the cash account a~ a debit in respect of the cash received. In social accounting, however, cash transactions arc not separately presented.On the other hand, cash bahniccs arc recorded in the capital transaction account. This shows that social accounting also adopts the double entry method hut the second entries ‘arc not recorded in detail. (I,) Another difference between private accounting and social accounting i that private accounts relate to the individual businessmen. Each transaction is thus recorded from one point of view only. On the contrary. social accounts relate to a connected and closed network of all businessmen. There arc no looseends. Each transaction is recorded from the point of tors of the company. On the other hand, in social accounting, these income arc shown ncl. There is no counterpane OIl all of a balance sheet in social accountable) there arc insuperable difficulties in collecting thc cryosurgery information completely and on a ” 11 ha~ls regarding assets ami liabilities of all transactors in the economy, Uses of Social Accounting One might as well ask what after all is the object and purpose of preparing social account!’, To what uses I arc the social accounts put’! We may give below in a summary fashion the purposes for which the social accounts arc prepared or the uses to which they are put:
Production Account. In this account. we include all productive activities being carried on in the entire economy. It is a consolidated production statement relating to all firms operating in the economy. These firms manufacture commodities meant for consumption and capital goods and equipment for continuing and accumulating wealth, The income obtained by these firms, therefore. comes through two channels partly by selling consumption goods and partly by selling capital equipment. The flow of this revenue is indicated by the direction of the arrows. In these accounts, purchases and sales by the firms from one another have obviously to be left out. They may be important for individual accounts hut in the national or social accounts they cancel out.