Social accounting

Social accounting may be defined as identification and recording of business activities regarding social responsibility. Social responsibility concept is the one of the important concept of management . It is the duty of enterprise to do some social activities for completing their social responsibility . Social accounting is very important tool to measure the performance of any company in view of social responsibility . Company has to make social responsibility income statement and balance sheet . But it is not compulsory to make these statements . France , UK and USA are the top countries where social responsibility statements are made with other financial statements . In India social accounting is not so popular but some India companies are now focusing on social responsibility and also started to make social report for calculating to total cost and benefits for performing social responsibility . Objectives of social accounting Main objectives of social accounting are to help society by providing different facilities by enterprise and to record them. We can write them in following points 1. Effective utilization of natural resources - Main objectives of making social accounting is to determine whether company is properly utilize their natural resources or not . 2. Help to employees - Company can help employees by providing the facility of education to children of employees, providing transport free of cost and also providing good working environment conditions . 3. Help to society - Because companies' factories spread the pollution in natural society which is very harmful for society . So , enterprise can help to society by planting the trees , establishing new parks near factory area. and also opening new hospitals 4. Help to customers - In social accounting this the part of benefits given by company to society , if company provides goods to customers at lower rate and with high quality . 5. Help to investors - Company can help to investors by providing transparent accounting information to investors . Because of many objectives are related to safeguarding of natural resources so this accounting is also known as Social and Environmental Accounting, Corporate Social Reporting, Corporate Social Responsibility Reporting, Non-Financial Reporting, Sustainability Accounting. Social accounting (also known as social accounting and auditing, social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting or accounting) is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large.

Social accounting emphasizes the notion of corporate accountability. D. Crowther defines social accounting in this sense as "an approach to reporting a firms activities which stresses the need for the identification of socially relevant behavior, the determination of those to whom the company is accountable for its social performance and the development of appropriate measures and reporting techniques." Purpose Social accounting, a largely normative concept, seeks to broaden the scope of accounting in the sense that it should: concern itself with more than only economic events; not be exclusively expressed in financial terms; be accountable to a broader group of stakeholders; broaden its purpose beyond reporting financial success. It points to the fact that companies influence their external environment ( some times positively and many a times negatively) through their actions and should therefore account for these effects as part of their standard accounting practices. Social accounting is in this sense closely related to the economic concept of externality. Social accounting offers an alternative account of significant economic entities. It has the "potential to expose the tension between pursuing economic profit and the pursuit of social and environmental objectives".The purpose of social accounting can be approached from two different angles, namely for management control purposes or accountability purposes. 1. Why is it important to study international economics? Some knowledge of international economics is thus necessary to understand what goes on in the world of today and to be informed consumers,citizens,and voters.On a more practical level,the study of international economics is required for numerous job in multinational corporations,international banking,government agencies such as the Department of Commerce,and international organizations such as the United Nations,the World Bank,and the International Monetary Fund. Why study international economics and business? To prepare for working in a global economy- The MBC international economics and business major prepares students for careers in businesses involved in importing or exporting goods and services, financial institutions dealing with foreign currencies, and not-for-profit organizations involved in foreign aid and diplomacy. To develop reasoning skills- International economics and business majors learn how to think through problems, compare alternatives, make decisions, offer solutions, and take charge. To master data analysis- International economics and business majors learn how to understand, use, and question statistical and financial data. They gain considerable experience in downloading data from the Internet, forming meaningful ratios, plotting graphs, using spreadsheet and statistical software, and writing technical reports. To become aware of sustainability concepts and initiatives- The business department at MBC has made a very intentional shift to include study of sustainability concepts and practices throughout courses in the curriculum. Business courses will help students understand how sustainability initiatives can benefit society on both a global and local basis. Select courses will provide an applied component as well. To prepare for the MBA- The international economics and business major is an excellent springboard for the MBA. A Business Week survey showed that the most common undergraduate majors of MBA graduates earning more than $100,000 were engineering and economics. To prepare for a viable career- The Bureau of Labor statistics considers economics one of the more flexible majors because the analytical skills developed in that major can be applied in numerous occupations. To understand the current economic crisis and its international context- We are facing the worst financial crisis and possibly the worst economic recession since the Great Depression of the 1930s. Although the roots of this crisis lie with a housing bubble and lax credit policies in the USA, the effects are felt worldwide because massive global lending and American borrowing from abroad fed the expansion of the bubble. The international economics and business major lays a strong foundation for understanding the crisis and judging the policy options for ending the crisis.

Difficulties in measuring national income There are many difficulties in measuring national income of a country accurately. The difficulties involved in national income accounting are both conceptual and statical in nature. Some of these difficulties involved in the measurement of national income are discussed below: Non Monetary Transactions- The first problem in National Income accounting relates to the treatment of nonmonetary transactions such as the services of housewives to the members of the families. For example, if a man employees a maid servant for household work, payment to her will appear as a positive item in the national income. But, if the man were to marry to the maid servant, she would performing the same job as before but without any extra payments. In this case, the national income will decrease as her services performed remains the same as before. Problem of Double Counting- Only final goods and services should be included in the national income accounting. But, it is very difficult to distinguish between final goods and intermediate goods and services. An intermediate goods and service used for final consumption. The difference between final goods and services and intermediate goods and services depends on the use of those goods and services so there are possibilities of double counting. The Underground Economy- The underground economy consists of illegal and uncleared transactions where the goods and services are themselves illegal such as drugs, gambling, smuggling, and prostitution. Since, these incomes are not included in the national income, the national income seems to be less than the actual amount as they are not included in the accounting. Petty Production- There are large numbers of petty producers and it is difficult to include their production in national income because they do not maintain any account. Public Services - Another problem is whether the public services like general administration, police, army services, should be included in national income or not. It is very difficult to evaluate such services. Transfer Payments - Individual get pension, unemployment allowance and interest on public loans, but these payments creates difficulty in the measurement of national income. These earnings are a part of individual income and they are also a part of government expenditures. Capital Gains or Loss- When the market prices of capital assets change the owners make capital gains or loss such gains or losses are not included in national income. Price Changes- National income is the money value of goods and services. Money value depends on market price, which often changes. The problem of changing prices is one of the major problems of national income accounting. Due to price rises the value of national income for particular year appends to increase even when the production is decreasing. Wages and Salaries paid in Kind - Additional payments made in kind may not be included in national income. But, the facilities given in kind are calculated as the supplements of wages and salaries on the income side. Illiteracy and Ignorance- The main problem is whether to include the income generated within the country or even generated abroad in national income and which method should be used in the measurement of national income.

Besides these, the following points are also represents the difficulties in national income accounting: Second hand transactions; Environment damages; Calculation of depreciation; Inadequate and unreliable statistics; etc. The three main limitations to national income accounting are :

Errors in Measurement: Black Market and underground activities are not included when calculating GDP. This is because there is no way to accurately measure black market activity. In the United States, this is a relatively small percentage of the total GDP; however, in many other less developed countries, it can go as high as 70% of the country's total GDP. Another big measurement error is inflation. It is adjusted according to base prices and various other things and the range of possible inflation can be as much as 1% to 15% in some places. Subcategories that are misrepresented: The various interpretations of what should be included in consumption or government spending plays a big part in the overall determination of GDP. Decisions are made about what is to be included where, but minor discrepancies will always arise. Welfare is NOT Measured: GDP only measures the market activity and does not take welfare into account. The economic activity of a country could rise, while welfare could possibly have fallen. Different situations may occur that have a negative impact on the people which cause them to increase spending, therefore increasing the GDP.