NATIONAL UNIVERSITY OF

SAN MARCOS
(University of Peru; Dean of America)

FACULTY OF ECONOMIC SCIENCES

PROFESSIONAL SCHOOL OF ECONOMICS

SUMMARY MODULE III THE ANALYSIS

FUNCTIONAL

Student: Carlos Acosta Tapia

Professor: Gregorio Navarro León
Course : National Accounts
Faculty: Economic Sciences
Cycle : II

2015
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I. FUNCTIONAL ANALYSIS

1.1. FUNCTIONAL UNITS

Institutional units can have different functions (perform different
activities). This activity is characterized by three elements:
Some inputs of goods and services
A productive process
Some products obtained (output)

If we arrange these activities of an institutional unit according to the added value, we

You will be able to distinguish the main activity, which is the one that generates the most added value, and the
secondary activity which would be the others.

In addition, a unit can perform auxiliary activities whose production is not intended
its use outside of the unit; a support activity aimed at creating the
favorable conditions that allow the development of the main activity and the secondary ones.

1.2. ACCOUNTS OF INSTITUTIONAL SECTORS

1.2.1. COMPLETE SEQUENCE OF ACCOUNTS

a) Current accounts; they deal with production, generation, distribution, and redistribution.
a of income and its use in the form of final consumption

b) Accumulation accounts; those that reflect the variations of assets with liabilities
a and the variations of net worth.
c) Balances; they show the stocks of assets and liabilities and the net value

1.2.2 INTEGRATED ECONOMIC ACCOUNTS

The integrated economic accounts constitute the core of the accounting framework of current
accounting systems; these have the ability to associate the accounts of the sectors and
of the total economy. These accounts do not include financial accounts either
They include accounts of other variations of assets or non-financial balances.

1.3. CONCEPTUAL CLARIFICATIONS

1.3.1 VALUATION OF PRODUCTION AND INTERMEDIATE CONSUMPTIONS

As has been seen, the type of production determines the type of producer and this causes a
institutional unit is classified within a sector, that is to say, market prices are the
basic reference for valuation. It was also seen that there are 3 classes of valuation (to the
basic prices, producer prices, and buyer prices) that differ from each other
for the taxes and subsidies on the products.

Intermediate consumption is always valued at buyer prices; which are

directly observable by users of the goods.

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 1.3.2 MOMENT OF RECORDING SOME OPERATIONS

There are different criteria for recording flows: cash basis; maturity basis
payment; payment commitment; and accrual criteria.

All these criteria have their advantages and disadvantages and are used for different purposes in
in the core of companies, in the case of accounts, the accrual criterion is prioritized.
1.3.3 THE TWO CONCEPTS OF FINAL CONSUMPTION

The system talks about:

a) Final consumption expenditure; carried out by the resident institutional units in

goods and services used to directly satisfy needs
individual or collective; this can be carried out by units of the sectors
homes and the general government eISFLSH.
b) Effective final consumption; includes the goods and services acquired by units.
institutional to directly satisfy human needs whether they are
individual or collective. Only households and units can carry it out.
public administration.

II. HOUSEHOLD SECTOR

2.1. DEFINITION AND SUBSECTORING

2.1.1. DEFINITION
Formed by individuals or a group of individuals who collectively assume
ultimately take responsibility for consuming.

2.1.2. SUBSECTORING
It can be subsectorized according to the income category of each household taking into account
such: (Employers, Employees, etc.)

2.2. ACCOUNTS

In the household sector accounts, the data provided is used.

2.2.1. PRODUCTION ACCOUNT

The value of market production reflects the result of the activity of companies.
individuals. Regarding production for personal final use, it includes services of
rentals.

2.2.2. OPERATING ACCOUNT

The remuneration of employees includes the total cost of the labor factor, including the
remunerations in kind and the effective and allocated contributions which
corresponds to what employees should pay to their employers for the
social benefits.

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 2.2.3. ACCOUNT FOR PRIMARY INCOME ALLOCATION

While the profit and loss account deals with the income generated in the process
productive; the primary income allocation account deals with the
units/sectors residents as recipients of such income.

2.2.4. SECONDARY INCOME DISTRIBUTION ACCOUNT

This account includes all operations that redistribute income and that, among others
fines help to correct social imbalances. These accounts record the
current transfers related to non-life insurance include the transfers
various currents (remittances from emigrants, fines)

2.2.5. IN-KIND INCOME REDISTRIBUTION ACCOUNT

This account aims to present an alternative for available income of

the households in which the expenses collected by the general government and the ISFLSH are recorded
intended to finance certain services.

2.2.6. AVAILABLE INCOME USAGE ACCOUNT

This account records the expenditure on final consumption of goods and services made by
homes in the economic territory as in the rest of the world.

2.2.7. ACCOUNT OF ADJUSTED DISPOSABLE INCOME UTILIZATION

This account records the individual effective final consumption. The transaction is the same as
In the previous account, the D.8 and the accounting balance is the savings balance; due to the fact that the
the increase in resources and jobs is the same

2.2.8. ACCOUNT OF VARIATIONS IN NET WORTH DUE TO SAVINGS AND THE

CAPITAL TRANSFERS

In the capital account, the first entry to comment on is the capital transfers to
charge and pay. The account balance is the net loan – net indebtedness; which is
the amount that the sector has available to finance other sectors.

Final Consumption of Households

2.3.1. RELATIONSHIP BETWEEN FINAL CONSUMPTION EXPENDITURE AND FINAL CONSUMPTION
CASH
There are three sectors (households, public administrations, and Non-Profit Institutions Serving Households) with the capacity to spend.
in final consumption. In contrast, there are only two sectors that can engage in final consumption.
this is the household and public administrations.

2.3.2 FUNCTIONAL AND SPATIAL COVERAGES OF CONSUMPTION

a) FUNCTIONAL: Final consumption expenditure of households includes all those goods

and services including rental services of homes occupied by their owners
which is not considered intermediate consumption.

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 b) SPATIAL: Ultimately, it is about defining the national and internal concepts of
final consumption of households.

INTERNAL CONSUMPTION: (A) + (C)

NATIONAL CONSUMPTION: (A) + (B)

NATIONAL CONSUMPTION: INTERNAL CONSUMPTION + (B)–(C) = (A) + (B)

Where (A): final consumption of resident households carried out in the economic territory of the country

final consumption of resident households made in the rest of the world

final consumption of non-resident households carried out in the economic territory of the country

2.3.3. TIME OF REGISTRATION

Follow the general criterion of recording expenses for the purchase of an asset when it takes place.
change of ownership and those for acquiring a service when its provision ends.

2.3.4 SOURCES OF INFORMATION

The sources of information used for estimating final consumption expenditure of the
Households are diverse; the most important in Spain is the Household Expenditure Survey.

III. THE NON-FINANCIAL SOCIETIES SECTOR

3.1. DEFINITION AND SUBSECTORING

3.1.1. DEFINITION
It is the set of entities endowed with legal personality that are market producers.
whose main activity is the production of non-financial goods and services. Among the
The units that make up this sector are: Cooperatives, Private limited companies
and public, Holding Companies, etc.

3.1.2 SUBSECTORING
The criterion used by the system is control, that is, the ability to determine if it
It is necessary to establish the general policy of the company through the appointment of the administrators.
propitious. In this way, the subsectors included in the system, whose accounts very
few countries produce are:

a) NON-FINANCIAL PUBLIC COMPANIES: Controlled by the government

b) PRIVATE NON-FINANCIAL COMPANIES: Controlled by government units
or non-resident units

3.2. ACCOUNTS

Each account refers to a specific aspect of economic behavior and shows the entries.
corresponding for the units (institutional and establishments) or groups of units
(institutional sectors, total economy and rest of the world, and activity branches/industries).

3.2.1. PRODUCTION ACCOUNT

It should only be noted that it is the sector that contributes the most to value generation.
added to the economy.

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 3.2.2. OPERATING ACCOUNT

It is advisable to analyze the surplus operating accounting balance, as is known,

it corresponds to the remuneration of the capital factor used in the process
productive.

3.2.3. PRIMARY INCOME ALLOCATION ACCOUNT

This account shows the behavior of the sector regarding the income of the
property

3.2.4. SECONDARY INCOME DISTRIBUTION ACCOUNT and ACCOUNT OF

USE OF DISPOSABLE INCOME

The accounts of income distribution and the use of disposable income have been
jointly arranged simply to show that the sector does not carry out for
definition no final consumption transaction, so its disposable income
coincides with saving.

3.2.5 CAPITAL ACCOUNT

The sector receives capital transfers and pays them in the form of taxes on the
capital and other transfers.

3.3. ESTIMATION OF CERTAIN TRANSACTIONS

3.3.1. PROCEDURES FOR ESTIMATING TRANSACTIONS THAT AFFECT

TO THE HOUSEHOLDS AND NON-FINANCIAL SOCIETIES SECTORS

The procedures can be grouped into three categories.

a) DISTRIBUTION; it is used to distribute transactions such as production, consumption
intermediaries, remuneration of wage earners, etc.
The procedure is based on assigning a priority character and obtaining the remaining ones.
as a result of operating the above
b) DIRECT ASSIGNMENT; it applies in transactions such as remuneration for the
employees. In this procedure, the information coming from the various
sources are used to obtain the added value
c) MATRIX ASSIGNMENT; it applies to interest transactions, dividends, etc.
These are transactions that exchange between all sectors in such a way that
a value must be assigned for the transaction.
3.3.2. CONSUMPTION OF FIXED CAPITAL

Represents the amount of fixed assets consumed as a result of depreciation.

normal, it should be calculated for all tangible and intangible fixed assets, such
such as expenses in mining and oil exploration, based on stocks of
fixed assets and the probable average economic lifespan of the different categories of
these goods.

It is calculated according to the linear amortization method, through which the value of the
Fixed assets are amortized at a constant rate throughout the useful life of the asset.

IV. THE FINANCIAL SOCIETIES SECTOR

4.1 DEFINITION AND SUBSECTORING

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 It includes all societies and quasipartnerships that are primarily dedicated to the
financial intermediation. Financial intermediation consists of channeling funds between the
institutional units that have an excess of funds and those that lack them.

The subsectorization is as follows:

4.1.1 CENTRAL BANK: Its main function is to issue currency.

4.1.2 OTHER MONETARY FINANCIAL INSTITUTIONS: Type of intermediation
it consists of receiving deposits from institutional units other than the institutions
monetary finances and granting loans.
4.1.3 OTHER FINANCIAL INTERMEDIARIES, EXCEPT FOR COMPANIES OF
INSURANCE AND PENSION FUNDS: Institutions whose form of intermediation
it consists of incurring liabilities other than cash and deposits
4.1.4 FINANCIAL AUXILIARIES
4.1.5 INSURANCE COMPANIES AND PENSION FUNDS: Units that are dedicated to
financial intermediary in the form of risk compensation.

4.2 MONETARY FINANCIAL INSTITUTIONS (MFI)

4.2.1 INDIRECTLY MEASURED FINANCIAL INTERMEDIATION SERVICES

(SIFMI):

What these institutions do instead of charging them directly for the services of
intermediation is reducing the interest rates they pay on deposits.

4.2.2 OLD ACCOUNTING TREATMENT OF SIFMI:

The SCN 93' and 95' conventionally define the difference between total revenues
from the property received by the unit that remains in service and the total of the interest paid
for that unit. This conventional treatment requires making adjustments in the
accounts of the IFM.

4.2.3 NEW ACCOUNTING TREATMENT OF SIFIMI

It refers to the process by which a financial institution accepts deposits from units that want to
receive interest on the deposited funds. The bank provides a mechanism
through which the first unit lends funds to the second. Both pay a rate to
bank for the service provided.

4.3 INSURANCE COMPANIES AND PENSION FUNDS

Its basic function is the compensation of risks, which can be classified into two.
large categories: the so-called social insurance systems (A) and the other insurances (B)

V. THE PUBLIC ADMINISTRATION SECTOR

5.1 DEFINITION AND SUBSECTORIZATION

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 5.1.1 DEFINITION: Includes all institutional units that are other producers not
from the market whose production is intended for collective or individual consumption.

FUNCTIONS: Production of non-market services, Income redistribution

5.1.2 SUBSECTORING: The SCN 93' admits 2 forms

METHOD 1
CENTRAL GOVERNMENT (Central Administration)
STATE GOVERNMENT (Autonomous communities)
LOCAL GOVERNMENT (Local Corporations)
SOCIAL SECURITY FUNDS (Social Security Administrators
Social

METHOD 2
oS,1321 CENTRAL GOVERNMENT + f.s.s operating at that level
oS,1322 STATE GOVERNMENT + f.s.s operating at that level
oS,1323 LOCAL GOVERNMENT + f.s.s operating at that level

The choice between the two methods depends on the importance and the way of managing the
f.s.s. in each country.

5.2 ACCOUNTS

5.2.1 INCOME AND EXPENSES ACCOUNT OF S.13:

The taxes listed on this account are indirect taxes. The largest revenues
they come from VAT and taxes on specific consumption.

5.2.2. SECONDARY INCOME DISTRIBUTION ACCOUNT

In this account, the resources corresponding to income taxes stand out.

natural persons

5.2.3. IN-KIND INCOME REDISTRIBUTION ACCOUNT

The item listed in this account refers to in-kind social transfers,

including both transfers of goods and non-market services

5.2.4. ACCOUNT OF USE OF AVAILABLE INCOME and ACCOUNT OF

USE OF ADJUSTED DISPOSABLE INCOME
These two accounts repeatedly highlight the commented difference between spending on consumption.
final and final effective consumption being the balance of both accounts the same savings

5.2.5. ACCOUNT OF CHANGES IN NET WORTH DUE TO SAVINGS AND THE

CAPITAL TRANSFERS and ACCOUNT OF ACQUISITIONS OF NON-ASSETS
FINANCIAL
5.3 THE PRODUCTION AND FINAL CONSUMPTION EXPENDITURE OF PUBLIC ADMINISTRATIONS

5.3.1 OTHER PRODUCTION NOT FOR MARKET

It is the production that the units of the public authorities supply to other units in a way
free or economically priced

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 5.3.2 EXPENDITURE ON FINAL CONSUMPTION OF PUBLIC ADMINISTRATIONS

The final consumption expenditure of the public administrations includes two categories:

GOODS AND SERVICES FOR INDIVIDUAL CONSUMPTION

GOODS AND SERVICES FOR COLLECTIVE CONSUMPTION

VI. THE SECTOR OF NON-PROFIT INSTITUTIONS SERVING HOUSEHOLDS

(ISFLSH)

A series of activities whose importance and economic weight has grown among these activities.
beneficial, those related to education and healthcare; these activities are usually carried out by equipped entities.
with legal personality. The great development of these entities has made the accounting system
nationals have decided to create a specific sector to record their flows and stocks.

6.1 DEFINITION:
Composed of non-profit institutions within the sector include: labor unions;
charitable associations, etc.

6.2 CASE OF ACCOUNTING IN SPAIN

The ISFLSH sector is the result of adding flows and stocks corresponding to three industries:

HEALTH AND SOCIAL SERVICES OF NON-MARKET OF ISFLSH

NON-MARKET ASSOCIATIVE ACTIVITIES OF ISFLH
RECREATIONAL AND CULTURAL ACTIVITIES OF THE NON-MARKET
ISFLSH

6.2.1. HEALTH AND SOCIAL SERVICES OF NON-MARKET OF ISFLSH

Non-profit hospitals
Nursing Homes
HEALTH FOUNDATIONS AND ASSOCIATIONS
Social works of the savings banks

6.2.2 NON-MARKET ASSOCIATIVE ACTIVITIES OF ISFLSH

Political Parties
UNIONS
NEIGHBORHOOD ASSOCIATIONS
CHURCHES
FOUNDATIONS AND ASSOCIATIONS FOR THE DEFENSE OF RIGHTS OF THE
PERSONAS

6.2.3 RECREATIONAL AND CULTURAL ACTIVITIES OF NON-MARKET ISFLSH

Cultural and Recreational Clubs

SPORTS ASSOCIATIONS, GROUPS AND SOCIETIES
NATIONAL SPORTS FEDERATIONS

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 6.3 TRANSACTIONS CHARACTERISTICS OF THE SECTOR AND MAIN SOURCES OF
INFORMATION

6.3.1 PRODUCTION

Total production is calculated by the total production costs, that is, as the sum of:

Intermediate costs + employee compensation + fixed capital consumption + others

taxes
6.3.2 EXPENDITURE ON FINAL CONSUMPTION

Include the following two categories of expenses:

The value of goods and services produced by the IFSLSH that do not constitute either
gross capital formation by own account or household expenditure
The expenses of the ISFLSH on goods and services produced by producers of
market, which supply to households.

6.3.3 SOURCES OF INFORMATION

The main sources of information are as follows

Profit and loss accounts (NGOs, Unions, etc.)

Audit report on the number of political parties
The statistics of the Catholic Church in Spain
Report of the Social Work of the Savings Banks

VII. THE REST OF THE WORLD SECTOR

7.1 DEFINITION AND SUBSECTORING

7.1.1 DEFINITION:

Set of units that is not characterized by a main function and resources.

Formed by non-resident units to the extent that they carry out operations.
with resident institutional units.

7.1.2 SUBSECTORING
It is divided into 2 sectors:

EUROPEAN UNION
THIRD COUNTRIES AND INTERNATIONAL ORGANIZATIONS

7.2 ACCOUNTS AND TRANSACTIONS

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7.2.1 CHARACTERISTICS

The accounts of the rest of the world record the transactions between units.
residents and non-residents
They are developed from the perspective of the rest of the world.
The sequence of accounts from the rest of the world follows the same scheme for
the institutional sectors
CURRENT ACCOUNTS
. Balance of trade in goods and services
. External account of primary income and transfers
currents
ACCUMULATION ACCOUNTS
. Account of variations in net worth due to savings and
capital transfers
. Account of acquisitions of non-financial assets

7.2.2 TRANSACTIONS OF GOODS AND SERVICES

The exports of goods and services consist of operations through

which residents provide goods and services to non-residents
The imports of goods and services consist of operations through
which non-residents supply goods and services to the
residents.

7.2.3 DISTRIBUTION TRANSACTIONS

Remuneration of salaried employees

Taxes on production
Subsidies
Current taxes on income, etc.

7.2.4 STATISTICAL SOURCES

Foreign trade statistics

Balance of payments
INE

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