a new accounting revolution_final

8/3/2019 A New Accounting Revolution_final

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Mr. Philip Thankan

Mr. Terence Fernandes

Mr. Vidyadhar Salunkhe

ITM X-MBA Batch 34 Macro Economics by Prof. Vasudev Iyer

Article from Shankar Jaganathan


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Understanding the

Case Study Slide 3 7

Case Study Questions Slide 8 - 10I. How has National Income

Changedover a periodof time?

II. Is the present methodof

Estimating National Income Correct?

III. What changes arerequired

in the Present methodology?


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1494 Luca Pacioli documented the Double entry

bookkeeping.

The end or purpose of every business man being tomake lawful, and fair enough profit to keep himself

substantially,

In a thrive for growth the principle of accounting

changed to The objective of business is profit

This accounting principle talked about Income

accounting and Profit.


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October 1929 was a defining moment in the 20th

century.

The US stock market crashed leading to prolonged

depression.

Depression gradually spread across the globe....and

for the first time regulators and Government

wanted to know aggregate numbers for theeconomy....

This led the foundation of Reporting National

Income Reporting.


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PRODUCTION METHODPRODUCTION METHOD Primary sector is divided into agriculture, fisheries, animal husbandry.Primary sector is divided into agriculture, fisheries, animal husbandry. Secondary sector consists of manufacturing.Secondary sector consists of manufacturing. Tertiary sector is divided into trade, transport, communication, banking,Tertiary sector is divided into trade, transport, communication, banking,

insurance etc.insurance etc.

INCOME METHODINCOME METHOD Gross National Product (GNP)Gross National Product (GNP) Gross Domestic Product (GDP)Gross Domestic Product (GDP) Gross National Income (GNI)Gross National Income (GNI) Net National Product (NNP)Net National Product (NNP)

Net National Income (NNI).Net National Income (NNI).

EXPENDITURE METHODEXPENDITURE METHOD Private consumption expenditure,Private consumption expenditure, Private investmentPrivate investment Public consumptionPublic consumption

Public investmentPublic investment


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WE ARE GROWING ATWHAT COST??

THE CURRENT REPORTING DID NOT INCLUDE THEIMPACT ON THE ENVIRONMENT - NATURALRESOURCE, SOCIETYWELLBEING.


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Quantitative:

- Money & Material

Accumulation

Qualitative:- Well-being (Social)

- Regeneration

(Environmental)


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In the Hunter-gathererera, per capita incomewas $90.

It took 18,000 yearsfor this todouble to $180 by

AD 1750. In the last 250 years, per capita incomemultipliedmanifold toreach $6,600.

About 97% of the consumptionin human

historywasin the last 0.01% of the time. Ifwe Link Per capita Income to populations, our

populationfrom about a billionin 1800, our

population crossedsix billion.


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The present methodof calculating National Incomewasadoptedfrom themodel of commercial enterprisesaccountingi.e Economic Transaction.

The paceofeconomic development resultedinnaturalresources consideredfreeforindividual businesseswereon thevergeofdepletion.

Natural resources, a common property, were being usedbyindividual firms togenerate profits. Capitalconsumedwas accounted asincome.

At a societal level, economic incomewasnot accuratelyreported asenvironment capital consumed togenerateeconomic incomedepleted theoverall societal capital.


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National Incomerequired: Changefrom Reportingonly Economic Transaction

toinclude Social and Environmental Accounting.

Werequired tomovemore towardssustainability accountingfor business and theeconomy as a whole. Economic capital isreportedin Monetary Terms.

Environmental capital reportedin physical unitsandmonetary terms.

Social capital report isqualitative terms


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a new accounting revolution_final

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