3

Economic Flows, Stock Positions,

and Accounting Rules

Th is chapter describes the economic fl ows and stock po-
sitions of the government fi nance statistics framework
and the accounting rules used to determine all aspects
of their recording.

Introduction.

3.1 Entries recorded in GFS are either economic
fl ows or stock positions.^1 Flows are monetary expres-
sions of economic actions and eff ects of events that re-
sult in changes in economic value within a reporting
period. Stock positions measure economic value at a
point in time. More specifi cally, stock positions refer
to a unit’s holdings of assets and liabilities at a specifi c
time and the unit’s resulting net worth, equal to total
assets minus total liabilities.

3.2 Th e fl ows and stock positions recorded in the
GFS framework are integrated, which means that all
changes in stock positions can be fully explained by
the fl ows. In other words, the following relationship is
valid for each stock position:

S 0 + F = S 1

where S 0 and S 1 represent the values of a specifi c stock
position at the beginning and end of a reporting pe-
riod, respectively, and F represents the net value of all
fl ows during the period that aff ected that particular
stock. More generally, the value of any stock position
held by a unit at a given time is the cumulative value
of all fl ows aff ecting that stock position that have oc-
curred since the unit fi rst acquired the particular type
of asset or liability.

3.3 Th e GFS framework includes a great diversity
of economic fl ows. Th is chapter fi rst describes sev-
eral important characteristics of economic fl ows that

(^1) In macroeconomic statistics, the term “fl ows” will oft en be used
as a short form for “economic fl ows,” and “stocks” will oft en be
used as a short form for “stock positions.”
underlie their classifi cation and treatment. It then de-
scribes in a general way the accounting rules used for
recording these fl ows and stock positions in GFS. De-
scriptions of specifi c categories of fl ows and stock po-
sitions and the application of the general rules to their
recording are discussed in Chapters 5 through 10.

Economic Flows.

3.4 Economic fl ows refl ect the creation, transfor-

mation, exchange, transfer, or extinction of economic

value; they involve changes in the volume, compo-

sition, or value of a unit’s assets, liabilities, and net

worth. A fl ow can be a single event, such as the pur-

chase of goods, or the cumulative value of a set of

events occurring during a reporting period, such as

the continuous accrual of interest expense on a gov-

ernment bond. All fl ows are classifi ed as transactions

or as other economic fl ows. Th e following sections de-

scribe these two types of economic fl ows.

Transactions.

3.5 A transaction is an economic fl ow that is an in-

teraction between institutional units by mutual agree-

ment or through the operation of the law, or an action

within an institutional unit that is analytically useful

to treat like a transaction, oft en because the unit is

operating in two diff erent capacities.^2 Th is defi nition

of a transaction stipulates that an interaction between

institutional units occurs by mutual agreement. Mu-

tual agreement means that there was prior knowledge

and consent by the units, but it does not mean that

both units entered into the transaction voluntarily.

Some transactions, such as the payment of taxes, are

imposed by force of law. Although individual units are

not free to determine the amount of taxes they pay,

(^2) For example, consumption of fi xed capital (23) and the use of
inventories in the production of goods and services (22) (see para-
graphs 6.27 and 6.53, respectively).