Social Accounting Meaning:
Social accounting meaning, is nothing but national income accounting or social and environmental accounting, that extends traditional financial accounting to include social and environmental factors. This broader concept provides a more broad view of a nation’s economic performance and well-being.
Social Accounting, with the development of this, national income is also being measured with the social accounting method. In the social accounts, transaction among various sector such as firms, household, government Etc. are recorded and their inter relationship traced from the total value of these transaction recorded in matrix form the national income value is known.
The social accounting framework is useful for economist as well as the policy maker because it represent the major economic flows and statistical relationship among various sector of the economic system. It is of particular interest and significance to the policy maker because by studying the national income series, over a period of time it becomes possible to forecast the trends of economy more accurately. In many countries annual economic planning is the form of national budget which are in fact nothing but forecast of social account for the following year.
Social Accounting Need:
1. Measurement of Economic Performance: Traditional economic measures like Gross Domestic Product (GDP) focus on economic output but ignore social and environmental costs. Social accounting includes factors such as income distribution, health, education, and environmental degradation, providing a more holistic measure of economic performance.
2. Policy Making and Evaluation: Social Accounting Provides policymakers with comprehensive data to make informed decisions that balance economic growth with social equity and environmental sustainability. It also evaluates the impact of policies and programs on social and environmental indicators, helping to refine and improve them.
3. Resource Allocation: Social Accounting helps in the efficient allocation of resources by identifying areas where investments can yield the greatest social and environmental benefits.
4. Economic Equity and Social Justice: Social Accounting analysis income distribution and highlights disparities, guiding efforts to promote economic equity and social justice. Monitors poverty levels and assesses the effectiveness of poverty reduction strategies.
5. Environmental Sustainability: It includes the valuation of natural resources and ecosystems, promoting their sustainable use and conservation. It measures the environmental impact of economic activities, such as carbon emissions and deforestation, and encourages environmentally friendly practices.
In Social Accounting, the economy as a whole is divided into certain parts called sector. A sector is a group of individual or institutions having common inter related economic transaction. Thus sectors are usually delineated in such a manner that economic entities whose function are similar or contained in one group. Thus sectors are distinguish on a functional basis and not on any institutional criteria
Under Social Accounting the economy divided into the following sector.
- Firms
- Household
- rest of the world
- capital sector
Social Accounting Graph:
- Firms are producing entities of the economy undertaken the productive activities thus they are all organization which employee the factors of production to produce goods and services.
- Households are consuming entities and represent a factor of production who receives payment for services render by them to firms. Firms make payment to household for their services.
- The government sector purchase goods and services from firms this purchase may be finance through taxation, public borrowings and any other fiscal means. The main function of the government is to provide social goods like defense, public health, education etc. meant to satisfy the collective wants of society.
- Rest of the world sector relates to international economic transaction of the country, it contains income and import transaction, external loan transaction and allied overseas investment income and payment.
