The concept was originally invented to measure the total net addition to a country's stock of wealth created by production during an accounting interval.
The idea is that if one deducts intermediate expenditures from the annual flow of income generated by production, one obtains a measure of the net new value of the new goods and services created.
This procedure must consistently identify and distinguish between costs and revenues, and between materials or services used up, fixed assets and new outputs, according to a standard valuation method.
In national accounts, this is especially important because the inputs of one enterprise are the outputs of another, and vice versa; lacking a consistent procedure, double counting would result.
In input-output analysis, disaggregated data on gross and net outputs of different economic sectors and sub-sectors is used to study the transactions between them.