<p>You need to take care here as capital appears twice in your table; once as a factor of production, and once as an "institution" (although it's really better thought of as a capital account).</p>

<p>"Profit" in the first column basically refers to Gross Operating Surplus in national accounts, and it's paid by industries (activities) to the capital factor - GOS can be considered the earnings of the capital factor of production (analagous to wages being the earnings of the labour factor).  Looking at the capital factor column, you can see that these earnings are in turn "paid" to the household sector.</p>

<p>The capital account, on the other hand, "receives" savings from government and households, and "spends" on Investment/Gross Fixed Capital Formation (and possibly valuables and inventories too depending on how your SAM is set up). The row=column balance on this account is just the typical Savings = Net Investment accounting identity.</p>

CC BY-SA 4.0
2019-06-13T17:01:15.737Z
2019-06-13T17:01:15.737Z
Gary
<p>In the process of building a social accounting matrix for Panama, I am trying to understand what capital refers to. The Panamanian National Accounts have tables on capital, but they describe gross capital formation. In a social accounting matrix, gross capital formation represents investment and not capital. So what does capital mean?</p>

<p><a href="https://i.sstatic.net/k4m34.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/k4m34.jpg" alt="A social accounting matrix"></a></p>

<p>I was also wondering if capital was included as part of Gross Value Added (GVA) and, if so, could it be calculated using GVA data?</p>

<p>Thank you!</p>

CC BY-SA 4.0
2019-06-12T23:59:05.990Z
Gross Value Added is basically Wages plus Profits, or equivalently Production less Intermediate Consumption. Capital does not come into this directly
Henry
CC BY-SA 4.0
2019-06-13T14:17:31.673Z
But how is profit calculated then? Isn't capital included in profit?
Sarah
CC BY-SA 4.0
2019-06-13T14:23:16.937Z
Profit here is production (i.e. sales adjusted for stock changes) less costs (essentially wages and intermediate consumption).  Capital does not come into it apart from stock changes, not even depreciation of capital, which is why it is *gross* value added
Henry
<national-accounts><input-output>
In a social accounting matrix, what does Capital refer to?
Sarah
# In a social accounting matrix, what does Capital refer to?

(Asked by: username_0 on 2019-06-12)

In the process of building a social accounting matrix for Panama, I am trying to understand what capital refers to. The Panamanian National Accounts have tables on capital, but they describe gross capital formation. In a social accounting matrix, gross capital formation represents investment and not capital. So what does capital mean?

[![A social accounting matrix](https://i.sstatic.net/k4m34.jpg)](https://i.sstatic.net/k4m34.jpg)

I was also wondering if capital was included as part of Gross Value Added (GVA) and, if so, could it be calculated using GVA data?

Thank you!

**Tags:** national-accounts, input-output
> **Comments:**
> **username_1**: Gross Value Added is basically Wages plus Profits, or equivalently Production less Intermediate Consumption. Capital does not come into this directly  
> **username_0**: But how is profit calculated then? Isn't capital included in profit?  
> **username_1**: Profit here is production (i.e. sales adjusted for stock changes) less costs (essentially wages and intermediate consumption).  Capital does not come into it apart from stock changes, not even depreciation of capital, which is why it is *gross* value added  

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## 1 answers

### Answer by username_2 on 2019-06-13. Score: 0

You need to take care here as capital appears twice in your table; once as a factor of production, and once as an "institution" (although it's really better thought of as a capital account).

"Profit" in the first column basically refers to Gross Operating Surplus in national accounts, and it's paid by industries (activities) to the capital factor - GOS can be considered the earnings of the capital factor of production (analagous to wages being the earnings of the labour factor). Looking at the capital factor column, you can see that these earnings are in turn "paid" to the household sector.

The capital account, on the other hand, "receives" savings from government and households, and "spends" on Investment/Gross Fixed Capital Formation (and possibly valuables and inventories too depending on how your SAM is set up). The row=column balance on this account is just the typical Savings = Net Investment accounting identity.


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