Debt Accounting
Posted on January 25, 2008
Filed Under Mortgage
In total national accounting of debts, debts are added according to those who are indebted. Public debt is a National debt held by the various governmental institutions. Household debts are the debts held by households. Business debts are held by businesses. Total debts are the sum of all these debts. The financial debts which are debts from one financial institution to the other are not included since it becomes double accounting. These debts can be computed in debt/GDP ratios. These ratios assess the variation of indebtness and size of the debt due. In some countries , there may be high consumer debt and low pubic debt and in other countries it may be vice-versa.
There is difference in the accounting of debt for private and public agents. If a private agent promises to pay something later, its debts are enforceable by public agents. But, if a public body passes a law stating promising to pay later , it keeps the right to change the law subsequently not to pay. That’s how payments after retirements of employees do not show up in public debt assessment whereas the money private companies promise to pay for retired employees, always shown in the debt assessment.
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