But the process of production uses up a certain amount of fixed capital. In later sections, each of these forms of accounts will be discussed.The economic accounts themselves contain major classifications of flows by significant characteristics. In the financial accounts, the excess of saving over tangible investment, or “net lending” from the saving-investment (or capital reconciliation) account, may be handled in alternative ways. In account 2, national income is presented, and to domestic product at factor cost is added “net factor income payments from the rest of the world.” This dual treatment emphasizes that product is best studied on a domestic basis, so that it need not be split according to residency of owners; whereas income is more meaningfully related to the command over resources, domestic or foreign, exercised by the residents of a nation.The national product is generally valued at market prices, while national income represents the factor cost of the same collection of final goods and services. In the next section, we view income and product as the consolidation of production accounts for the various producing industries.
All public transfers among nations are counted as capital grants. It is the cost of production.For example if the market price of rice is Rs. The productivity ratio may also be obtained as the ratio of input prices to output prices [Production is primarily a function of the enterprise sector, but households, nonprofit institutions, and general governments also hire factor services and contribute to the total value of product.Production accounts for enterprises represent rearrangements of their income (profit and loss) statements. Once a structure has been adopted, there is a cost in loss of continuity when it is changed or basically revised.Sectors are groupings of transactors similar in economic motivation and behavior, or at least more like each other than they are like the transactors grouped into a different sector. Greater detail and complexity in the accounts is attained, not only at a greater financial cost but also at the possible cost of some loss in clarity. The reviews often serve as background for projections, for policy recommendations to correct unsatisfactory developments, or for planning adaptive actions. There are also difficulties in deflating expenditures for nonstandard products, such as new construction and custom-built equipment.Factor cost, by type, may be deflated by appropriate factor price indexes. The division of the economy into sectors is somewhat different; in particular, the income accounts do not segregate a financial sector, which is essential to a flow-offunds system. It includes all items mentioned above under income method to GNP less indirect taxes.GNP at market prices always includes indirect taxes levied by the government on goods which raise their prices. Prominent types of unpaid economic activity for which a value might be imputed, given adequate data, are the services of housewives and other unpaid household labor, volunteer labor, schoolwork, and the rental value of durable goods (in addition to houses) owned by households, nonprofit institutions, and governments.Because of the greater importance of household production in less developed countries, it is apparent that income and product estimates tied closely to market criteria can give distorted results in temporal or international comparisons. Then there are the final purchases, credits to the producing account and debits to the other accounts. To implement this approach, they divide the economy into producing and consuming sectors.

Thus Net Domestic Product = GDP at Factor Cost – Depreciation.When GDP is measured on the basis of current price, it is called GDP at current prices or nominal GDP. The capital account may be elaborated in the direction of showing detailed flows-of-funds among sectors, and related to balance sheets and wealth statements for successive points in time.Economic accounting systems may thus provide comprehensive numerical estimates of economic stocks and flows within national or regional economies. It has been suggested that it would be more informative if data could be provided showing gross financial flows for the various categories.For the economy as a whole, saving and investment for all the sectors are summed. The result is a measure of real factor cost, or “input.” By comparing such measures with real product, or “output,” productivity measures can be derived. In balance sheets, the asset position of any unit or sector is balanced by liabilities plus a residual net worth. Instead of weighting physical units of the various final products by base-period prices, real product is generally obtained by dividing expenditures at current prices, grouped by types of goods and services, by appropriate price indexes with the base-period value of 100 per cent.
Special problems are posed by nonmarket products, particularly services of government and nonprofit institutions, although some progress has been made in measuring work units of various types and weighting them by unit costs.

On the basis of their sales projections, they can plan their investment, personnel, and other internal policies.

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