Net output: Difference between revisions

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{{Unreferenced|date=December 2009}}

{{short description|Accounting concept}}

'''Net output''' is an accounting concept used in [[national accounts]] such as the [[United Nations System of National Accounts (UNSNA)]] and the [[National Income and Product Accounts|NIPA]]s, and sometimes in corporate or government accounts. The concept was originally invented to measure the total net addition to a country's stock of wealth created by production during an accounting interval. The concept of net output is basically "gross revenue from production ''less'' the value of goods and services ''used up'' in that production". The idea is that if one deducts intermediate expenditures from the annual flow of income generated by production, one obtains a measure of the net new value inof the new productsgoods and services created.

==Definition==

In national accounts, net output is equivalent to the gross [[value added]] during an accounting period when producing enterprises use inputs (labor and capital assets) to produce outputs. [[Gross value added]] is called "gross" because it includes{{clarification needed|Doesdepreciation thischarges mean(or “failsmore to subtract off”precisely, or “subtracts off”? “Includes” should be replaced by one of these|date=March 2019}} depreciation charges or [[consumption of fixed capital]]). The calculation is importantly influenced byIf the definitionvalue of expendituresdepreciation andis incomessubtracted includedfrom within the scope of "production"gross value-added, somewe incomesobtain andthe expendituresnet arevalue includedadded. as "factor income" or "factor expenditure" directly related to production, other are not.

The calculation of net output is importantly influenced by the definition of expenditures and incomes included within the scope of "production" - some incomes and expenditures are included as "factor income" or "factor expenditure" directly related to production, other are not. The calculation involves an accounting procedure of "grossing and netting" the revenues which enterprises obtain from their outputs of goods and services, in order to establish what the real value of those outputs is.

This procedure must consistently identify and distinguish between costs and revenues, and between materials or services used up, fixed assets and new outputs, according to a standard valuation method. In national accounts, this is especially important because the inputs of one enterprise are the outputs of another, and vice versa; lacking a consistent procedure, [[double counting (accounting)|double counting]] would result. In turn, the "grossing and netting" procedure assumes a [[value theory]] and a definition of the coverage of [[production (economics)|production]]. Once we have that, we can aggregate a multitude of prices to obtain a price for the total value of net output.

==Components of net output==

The value of an aggregate net output is normally understood to be equal to the sum of:

*gross labour costs (or [[compensation of employees]]), .

*gross depreciation (or [[consumption of fixed capital]]), .

*income tax and indirect tax impostspaid onby producing productionenterprises, reduced by government subsidies paid to producers,producing enterprises during the same accounting period.

*gross (pre-tax) profit (or [[operating surplus]]) resulting from production.

In calculating net output for national accounts, government subsidies received by producing enterprises are normally subtracted from indirect tax levies paid by them during the same accounting period.

==Net output and GDP==

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*The valuation standards applied may be contested and differ somewhat between different countries.

*In [[Marxian economics]], the [[value product]] is offered as an alternative output measure, reflecting the new value produced by living labor.

*But there is also an [[ecology|ecological]] criticism that is sometimes made. The argument here is that, in calculating net output, costs and results are only assessed in ''price'' terms. Therefore, inputs to production and outputs which are not priced, are excluded in the valuation. Yet those inputs and outputs may nevertheless have an economic or human value, regardless of whether a price could be imputed to them or regardless of whether they can be made an object of trade. If the air is polluted, or depletion of fish stocks in the open seas occurs, the cost of repairing that is not accounted for in the net output of polluters or fishing companies. Sometimes [[tax]] levies are therefore imposed. Nowadays the [[Kyoto protocol]] has inspired "[[emissions trading]]", where the right to pollute is bought and sold, which some regard as a strictly perverse activity. Others however argue it proves the ability of competitive markets to solve any problem of resource allocation.

==See also==

*[[GDP]]

*[[GNP]]

*[[Gross output]]

*[[SectoralInput–output outputmodel]]

*[[GDP]]

*[[Intermediate consumption]]

*[[National accounts]]

*[[Input–outputSectoral modeloutput]]

*[[GNP]]

{{DEFAULTSORT:Net Output}}