Expenditure method is from the perspective of the final use of the destination, measuring the final results of production activities in the accounting period of an accounting method, including final consumption expenditure, gross capital formation, net exports of goods and services of three components.
Accounting formula: GDP = ? Final Consumption Expenditure + Gross Capital Formation + Net Exports of Goods and Services
Accounting for GDP with the expenditure method is to measure GDP by accounting for the total expenditure on the purchase of final products by the whole society during a certain period of time, i.e., the total selling price of the final products.
Who is the purchaser of the final products, as long as it depends on who is the final user of the products and services. In real life, the final use of products and services, in addition to residential consumption, there are business investment, government purchases and exports. Therefore, the expenditure method of accounting GDP, is to account for the economic society (refers to a country or a region) in a certain period of time consumption, investment, government purchases, and go out of the sum of these expenditures.
Consumption (personal consumption) expenditures (denoted by C) include expenditures on durables (e.g., automobiles, televisions, washing machines, etc.), non-durables (e.g., food, clothing, etc.), and services (e.g., medical care, travel, haircuts, etc.). Expenditures on the construction of dwellings are not included.
How is GDP accounted for?
There are three methods of accounting for GDP, i.e., the production method, the income method, and the expenditure method, which reflect the results of productive activities in the national economy from different perspectives.
The production method is a method of accounting that measures the results of all final production in a country or region during the accounting period from the point of view of value creation, i.e., the value added is obtained by deducting the value of intermediate products invested in the production process from the value of total products produced by each sector of the national economy during the accounting period.
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