Natural resources are essential for production and consumption, maintenance of life-support systems, as well as having intrinsic value in existence for intergenerational and other reasons. It can be argued that natural capital should be treated in a similar manner to man-made capital in accounting terms, so that the ability to generate income in the future is reduced, if the stock of natural capital falls. By failing to account reductions in the stock of natural resources, standard measures of national income misrepresent economic growth. The paper analyses an extension to the conventional economic accounts, which treats the services and depreciation of environmental resources, and marketed assets, in a manner consistent with neoclassical economic principles. The paper also discusses the accounting process that can contribute to the formulation of economic and environmental policy.