Difficulties of Social Accounting in Economics

Difficulties of Social Accounting

The social account present the following difficulty as follows:-

Imputations

In preparing social accounts all income and payment are measured in money.

But there are many goods and services which are difficult to impute in terms of money. They are services of the housewife in her home, painting as hobby by an individual, a teacher teaching his children at home, etc. Similarly there are a number of non-traded or non-marketed products and services. They are vegetables produced in the kitchen garden and consumed by the family itself, rental value of house occupied by the owner himself, a portion of farm produce retained by the farmer for personal consumption, etc. All such non-market transactions which cannot be assessed in money terms present problems in preparing social accounts accurately

Double Counting

The greatest difficulty in preparing social accounts is of double counting. It arises from the failure to distinguish between final and intermediate products. For instance, flour used by a bakery is an intermediate product and that by a household the final product. Similarly, 'the purchase of a newly constructed building by the government is taken under consumption output of the economy.

Public Services

Another problem is of estimating a number of public services in social accounts. They are police, military, health, education, etc. Similarly, the contributions made by multipurpose river valley projects cannot be fitted into the social accounts because of the difficulty of assessing their numerous benefits in monetary terms.

Inventory Adjustments

All inventory changes whether negative or positive are adjusted in the production accounts by inventory valuation adjustment. But the difficulty is that firms record inventories at their original costs and not at their replacement costs. When prices rise, there are gains in the book value of inventories. But when prices fall, there are losses in the value of inventories, So for corred calculation of inventories in business accounts under social accounting, inventory valuation adjustmen is required which is a very difficult thing.

Depreciation

Another problem in business accounts under social accounting is of estimatin depreciation. For instance, it is very difficult to estimate the current depreciation rate of a capital ass whose expected life is very long, say fifty years. The difficulty increases further when prices of asse change every year. Unlike inventories, it is very difficult to have depreciation valuation adjustment in social accounts.