ManagementParadise.com : Worlds Leading Management Portal. MBA | Classroom, Boardroom and Beyond


Go Back   ManagementParadise.com Forums - Your MBA Online Degree Program and Management Students Forum for MBA,BMS, MMS, BMM, BBA, students & aspirants. > Mirror View - Ebooks Links & Miscellenous Reading Material > Articles !!

Methods of Computing National Income

Methods of Computing National Income

Discuss Methods of Computing National Income within the Articles !! forums, part of the Mirror View - Ebooks Links & Miscellenous Reading Material category; Methods of Computing National Income There are three methods for computation of National Income viz.:- (i) Total Production Methods (or ...

Reply

 

LinkBack Thread Tools Display Modes
Advertisements
Methods of Computing National Income
Old
 (1 (permalink))
baidpkumar
baidpkumar is an unknown quantity at this point
 
baidpkumar
 
Institute: ICSI
Status: Offline
Posts: 1
Join Date: Oct 2009
Post Methods of Computing National Income - October 10th, 2009

Methods of Computing National Income

There are three methods for computation of National Income viz.:-
(i) Total Production Methods (or Value addition method)
(ii) Total Income Method and
(iii) Total Expenditure Method
In spite of three different methods, we should consider (or compute) National Income by all three methods. When a factory makes production of a product, it makes payment not only to suppliers of raw material, but also to its employees, and the employees, in turn makes expenditure for house hold or make saving. Thus all three methods should be used simultaneously.

Total Production Method

In this procedure, total quantity of goods/services is multiplied by market price and the result is Total Production. Following procedure can be a guide:-
(i) Production should be classified as per industry, e.g. (production) agriculture, fisheries, steel & metal, construction, automobile, (service) logistics, legal, medical etc.
(ii) Price of final goods is treated as total production.
(iii) Second hand goods and goods return and resold should not be taken into account.
(iv) Household production (by housewives) is not taken into account.
(v) Assets should be valued after depreciation.
(vi) Price of goods can be taken either (a) market value or (b) determined value or (c) imputed value.
(vii) Some items need special attention like wood (all wood are not sold), agriculture (all produce are not sold), houses (all houses are not rented), hence their imputed value is counted.
(viii) In case where a product goes through various processes along with its own identity, then only the value addition is to be taken. Say milk producer sells milk, cream producer purchases milk and sells cream and sweet producer purchases cream and sells sweets. In this case we should take price of final product and deduct price of intermediate product there from:-

Product Sale price Value Addition

Milk 20 20
Cream 35 15
Sweet 50 15 .
Total 105 50

Hence we take total production of Rs 50/- that’s why it is called value addition.

In the value of final product, we should make following adjustments:-

Deduct from Final Price:-
(i) Price of intermediate goods, (ii) Indirect tax (sales tax, excise)

Add in the Final Price:-
(i) Subsidy received (ii) Rent on self occupied property
(iii) Net factor income from Abroad

Total Income Methods

Under this method total income earned by factors of production is calculated. Each factor gives its contribution and gets consideration. Illustratively, following items are totaled:-

(i) Wages, salary of workers or employees
(ii) Interest on capital, dividend.
(iii) Rent on property rented
(iv) Notional (or imputed) value of rent on self occupied property
(v) Profit of company or profit of self employed person, i.e. operating surplus.

Following points are worth noting:-

(i) Net factor income from abroad shall be added.
(ii) Profit on drawing of goods for self consumption should be added.
(iii) Transfer income (pension, unemployment allowance)should not be added.
(iv) Money transfer (hawala), income tax, gambling income should not be included.

Total Expenditure Method

Under this method, all expenses are counted. Expenses are incurred by:-

(i) Private Consumption:- it includes household consumption and expenditure by non profit organizations. Expenditure on durables (including durables of more than one year like TV and furniture) are included but expenditure on residential building is not included, instead it is counted as capital formation. Rent on self occupied house is also counted. Further agriculture produced and consumed for self, interest on self employed capital is also included.
(ii) Government Consumption, i.e. expenditure made by government, e.g. expenditure to sustain law and justice, health etc. Transfer payments are not included.
(iii) Domestic investment (or capital formation), i.e. expenditure on immoveable goods, and increase (or accumulation) in stock. It includes buildings, road, bridges transport equipment, machinery etc. Work-in-progress, repairing of land & building are not included.
Advertisements
Friends: (0)
Reply With Quote
The Following User Says Thank You to For This Useful Post:
Related to Methods of Computing National Income
 

Similar Threads

Thread Thread Starter Forum Replies Last Post
National Income of India Vijay Kumar Vishwakarma Managerial Economics 12 March 9th, 2010 11:14 PM
national income jimzest28 Human Resources Management (H.R) 1 June 29th, 2009 09:31 PM
National income pratichi Managerial Economics ( Eco ) 0 December 26th, 2008 07:50 PM
help on national income David Rao Managerial Economics 2 August 9th, 2008 01:44 PM
NATIONAL INCOME yashM212522 Upload / Download Banking and Insurance Projects and Notes 0 April 14th, 2008 05:14 PM
 

Reply

Bookmarks

Tags
computing, income, methods, national

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are On


» Login
Forgot Password?  New User?
  

» Ads





» Recent Threads

Indian Rupee Update by...
Last post by Epic Research
2 Minutes Ago 12:16 PM
1 Replies
Asian Markets Update by...
Last post by Epic Research
4 Minutes Ago 12:14 PM
1 Replies
Talent vs Skill :...
Last post by Pramit Singh
47 Minutes Ago 11:31 AM
0 Replies
PROJECT ON NON...
Last post by Vinod Gupta
15 Hours Ago 08:41 PM
1 Replies
9 Benefits of Managing...
Last post by Vinod Gupta
15 Hours Ago 08:38 PM
1 Replies
BLACK LISTED COMPANIES
Last post by Vinod Gupta
15 Hours Ago 08:37 PM
6 Replies
OBJECTIVES OF FINANCIAL...
Last post by Vinod Gupta
15 Hours Ago 08:36 PM
1 Replies
Solution manual on... ( 1 2 3)
Last post by Vinod Gupta
15 Hours Ago 08:33 PM
28 Replies
Pest Analysis On Cadbury
Last post by Vinod Gupta
15 Hours Ago 08:32 PM
1 Replies
Project Report on Hotel... ( 1 2 3... Last Page)
Last post by Vinod Gupta
15 Hours Ago 08:31 PM
104 Replies
Project on Tourism... ( 1 2 3... Last Page)
Last post by Vinod Gupta
15 Hours Ago 08:28 PM
44 Replies
Logo and Tag line for a...
Last post by Vinod Gupta
15 Hours Ago 08:27 PM
6 Replies
SWOT ANALYSIS ON...
Last post by Vinod Gupta
15 Hours Ago 08:25 PM
1 Replies
SOLUTION MANUAL on...
Last post by Epic Fighter
16 Hours Ago 07:43 PM
1 Replies
Solution manual on... ( 1 2 3... Last Page)
Last post by Rainbow Li
16 Hours Ago 07:27 PM
36 Replies

» Projects Helpline

need books Operation...
Last post by Krunal Dhabhi
6 Days Ago 09:22 PM
7 ps of bank marketing
Last post by Sardar Waqas
1 Week Ago 07:34 PM
ManagementParadise.com is not responsible for the views and opinion of the posters. The posters and only posters shall be liable for any copyright infringement.


Management Paradise
About Us
Press
Jobs
Contact Us
Kartik Raichura
Legal
Terms & Conditions
Privacy Policy
Disclaimer
Copyrights
Help
Zeitgeist
Support
FAQs
Tour
Feedback
Partners
Follow
Copyright © 2004 - 2013 Management Paradise. Site Developed by Available.co.in