National Accounting Terms (Useful for all Competitive Exams)

National Accounting Terms 

National Accounting Terms

Accounting is the important concept for every industry whether a small scale industry or large scale industry, Accounting concepts mainly defines the financial performance and also indicates the level of profits and other risks involved in the organization performance and the environment in which it is operating, Here are some of the accounting terms which are useful to define and evaluate economic performance of Indian economy, Indian accounting terms include (list is big, but we defined here only some that are highly useful for all competitive exam like Banking, SSC, UPSC  etc)

Index ·        GDP (Gross Domestic Product) ·        GDP (At Market Price) ·        GDP (At Factor Cost) ·        GDP (At Current Price) ·        GDP (At Constant Price) ·        GNP (Gross National Product) ·        NDP (Net Domestic Product) ·        NNPFC (Net National Product at Factor Cost)/National Income ·        NNPFC (Constant Prices) ·        Deflator (also called as Price Level) ·        Per Capita Income ·        Real per Capita Income ·        Real Income ·        Factors of Production includes ·        Value of the Product: ·        Concept of Supply and Demand ·        Exchange Rate Determination ·        Definition of Depreciation ·        Implication or effects of Depreciation: ·        Appreciation ·        What is Inflation? ·        What is Deflation? ·        What is Hyperinflation? ·        What is Stagflation?

GDP (Gross Domestic Product)

This is the sum of total values of all the final goods and services produced with in the national territory during the financial year

GDP (At Market Price) 

(GDP of all final Goods and Services at market price), GDP evaluated at market price also incorporates indirect taxes and Subsides, so this may not represent true income of the society

GDP (At Factor Cost)

= GDP (Market Price) -- Indirect Taxes + Subsides

=GDP (Market Price) – (Indirect Taxes – Subsides)

=GDP (Market Price) – Net Indirect Taxes

GDP (At Current Price)

•     GDP Evaluated at Contemporary Prices
•     GDP at current prices can increase due to increase in output or increase in prices, but we take only the increase in the output we can also call this as the GDP (At cost and Price)

GDP (At Constant Price)

Refers to GDP calculated at Base year Price

Earlier it was 1993 -1994

Changed to 2004-2005

And presently it was 2011 – 2012

(Highly Important: Remember the Base years)

GNP (Gross National Product)

GNP=GDP + Net factor Income from Abroad

Net factor Income = Factor Income received – Factor income payments

GNP measures level of economic activities in a year by the residences of the country

NDP (Net Domestic Product)

Net Domestic Product is Equal to (Gross Domestic Product – Depreciation)

NDP = GDP – Deprecation

NNPFC (Net National Product at Factor Cost)

NNPFC = GDP (At Market Price) – Depreciation + Net factor Income from Abroad – Net Indirect Taxes

 NNPFC called National Income

NNPFC (Constant Prices)

NNPFC (Constant Price) = NNPFC (Current Price)/Price Level

Deflator (also called as Price Level)

Deflator = NNPFC (Current Price)/(NNPFC (Constant Price)

Per capita Income

Per Capita Income= National Income/Population

Real per capita Income

Real per capita Income = Per Capita Income/Price Level

Real Income

Real Income = National Income/Price level

Factors of Production includes

Labor – Works for Wages

Capital – Earns Interest

Land – Provides Rent

Entrepreneur – Works for making Profits

High important to know the factors of Production question asked in the previous prelims directly

Which of the following are the factors of production?

• ·        Labor
• ·        Capital
• ·        Resources
• ·        Land
• ·        Money
• ·        All the Above

All the above is correct

Value of the Product

This refers to price of product without indirect Taxes and Subsides

Concept of Supply and Demand

Supply = Demand (Price Stable)

Supply > Demand (Prices Decreases)

Supply < Demand (Prices Increases)

Exchange rate Determination

Suppose the Value of

1$ = Rs.55

Let at normal conditions

Import the Dollars = $120 = Demand for $’s

Export of Dollars = $100 = Supply of $’s

If Demand for $ > Supply of $’s (Then Price of Dollars $’s Increases)

If Demand for $< Supply of $’s (Then Price of Dollars $’s Decreases)

Definition of Depreciation

Refers to reduction in price of the currency in terms of another currency a movement from $1 =RS.50 to $1=Rs.60 is depreciation of Rupee, this makes our Exports cheaper and Imports Costlier

Implication or effects of Depreciation

Depreciation of a Rupee is like a Tax on returns on Foreign Investments in terms of Dollar, 10% depreciation reduces profitability on foreign investment by 10% so this adversely affects inflow of Foreign Capital

Depreciation of Rupee increases effective interest rate on ECB (External Commercial Borrowing)

Appreciation

Refers to increase in the price of currency in terms of other currency A movement from $1 =RS.50 to $1= RS.40 is appreciation of Rupee. This makes exports costlier and imports Cheaper.

What is Inflation?

Inflation is the important concept in National accounting process. Here is a Article to get insights into topic on Inflation

Index ·       Definition of Inflation? ·       What Causes/Types of Inflation ·       Cost Pull Inflation ·       Effects of Inflation ·       How the inflation is measured ·       WPI (wholesale price Index) ·       CPI (Consumer Price Index) ·       CPI (New Series Started 2012) ·       Difference between WPI and CPI ·       What is Deflation? ·       What is Hyperinflation? ·       What is Stagflation?

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