Check sibling questions

As per this method, we calculate Value addition by different firms and add it

From this, we reduce Depreciation, Indirect Taxes and Add Net Factor Income from Abroad to calculate National Income.

Slide22.JPG

Steps Followed in Value Added Method

  1. We identify and classify production units(sectors)
  2. We calculate their Value Added Separately and total it to get Gross Value Added at Market Price
  3. We reduce net indirect taxes and Depreciation to Arrive at Domestic Income
  4. We add net factor income from Abroad to get National Income

Example 2

From the information given below, Calculate 

Value added by Firm A and Firm B                ---> Output - intermediate Consumption

Gross Domestic Product at Market Price      ---> Total Value added of A and B

Net Domestic Product at Factor Cost           ---> Domestic income

Untitled.jpg

View Answer

Question 4

Particulars  ₹  in crores 
(i) Subsidies  1
(ii) Sales  100
(iii) Closing stock  10
(iv) Indirect taxes  5
(v) Intermediate consumption  30
(vi) Opening stock  20
(vii) Consumption of fixed capital  15
View Answer

What is Gross Value Added at Factor Cost?

We know that

GDP at Market Price is equal to Total Value Added by All Sectors/Companies

From this Depreciation is Reduced

So we get Net Value Added at Market Price

GDP MP (Gross Value Added at Market Price)
Less 
Depreciation
Net Value Added at Market Price

Example 3

Calculate Net Value Added at Market Price

Particulars Amt in Crores
Sales 90
Closing Stock   25
Opening Stock   15
Indirect Taxes   10
Depreciation 20
Intermediate consumption 40
Purchase of raw material 15
rent 5
View Answer

Question 10

Find Net Value Added at Market Price

Particulars Amt in Lakhs
Fixed Capital good with a life span of 5 years 15
Raw Materials 6
Sales 25
Net change in stock -2
Taxes on Production 1
View Answer

What is Gross Value Added at Factor Cost?

We know that

GDP at Market Price is equal to Total Value Added by All Sectors/Companies

From this Net Indirect Taxes is Reduced

So we get Gross Value Added at Factor Cost

 

GDP MP  (Gross Value Added at Market Price)

Less

Net Indirect Taxes (Tax-Subsidy)

Gross Value Added At Factor Cost

Example 4

Calculate Gross Value added at Factor Cost

Particulars Amt in thousands
Sales 500
Opening Stock 30
Closing Stock 20
Purchase of Intermediate Products 300
Purchase of Machinery 150
Subsidy 40
View Answer

Note

Net Indirect Taxes

=Taxes-Subsidy

= 0 - 40

= - 40

Sometimes Value of Output is not given in question

It is calculated by multiplying Quantity and Price per unit

OUTPUT = Price per Unit* No of Units Sold

Example 10

Calculate Gross Value added at Factor Cost

Particulars Amt
Units of Output Sold 1000
Price per unit of output 30
Depreciation 1000
Intermediate Cost 12000
Closing Stock 3000
Opening Stock 2000
GST 6000
View Answer

Sometimes Sales, Opening and Closing Stock is given in Question

We have to calculate value of Output

= Sales + Change in Stock

= Sales + Closing Stock - Opening Stock

Example 5

Calculate Gross Value Added at Market Price

Particulars Amt in lakhs
Depreciation 20
Domestic Sales 200
change in stock -10
Exports 10
Single use Producer goods 120
Net Indirect Taxes 20
View Answer

What is Net Value Added at Factor Cost?

We know that

GDP at Market Price is equal to Total Value Added by All Sectors/Companies

From this Net Indirect Taxes is Reduced

So we get Gross Value Added at Factor Cost

From this, Depreciation is Reduced to arrive at Net Value Added at Factor Cost

 

GDP MP (Gross Value Added at Market Price)

Less

Net Indirect Taxes (Tax-Subsidy)

Gross Value Added At Factor Cost

Less Depreciation

Net Value Added at Factor Cost

Example 6

Calculate Net Value Added at Factor Cost

Particulars Amt in lakhs
Subsidy 40
Sales 800
Depreciation 30
Exports 100
Closing Stock 20
Opening Stock 50
Intermediate Purchase 500
Purchase of machinery for own use 200
Import of raw material 60
View Answer

Question 3

Calculate Net Value Added at Factor Cost

Particulars Amt in crores
Purchase of machinery for production use 100
Sales 200
Intermediate Cost 90
Indirect Taxes 12
Change in Stock 10
GST 6
Stock of Raw material 5
View Answer

Question 8

Calculate Net Value Added at Factor Cost

Particulars Amt
Consumption of Fixed Capital 600
GST 400
Output Sold 2000
Price per unit of output 10
Net change in stock -50
Intermediate cost 10000
Subsidy 500
View Answer

Example 9

Calculate Net Value Added at Factor Cost

Particulars Amt in lakhs
Durable use producer goods with a life span of 10 years 10
Single use producer goods 5
Sales 20
Unsold output produced in the year 2
Taxes on production 1
View Answer

NCERT Questions

No questions in this part


Transcript

As per this method, we calculate Value addition by different firms and add it From this, we reduce Depreciation, Indirect Taxes and Add Net Factor Income from Abroad to calculate National Income. Steps Followed in Value Added Method We identify and classify production units(sectors) We calculate their Value Added Separately and total it to get Gross Value Added at Market Price We reduce net indirect taxes and Depreciation to Arrive at Domestic Income We add net factor income from Abroad to get National Income Example 2 From the information given below, Calculate Value added by Firm A and Firm B ---> Output - intermediate Consumption Gross Domestic Product at Market Price ---> Total Value added of A and B Net Domestic Product at Factor Cost ---> Domestic income -a- -ea-

CA Maninder Singh's photo - Co-founder, Teachoo

Made by

CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 12 years and a teacher from the past 16 years. He teaches Science, Economics, Accounting and English at Teachoo