Comparison-Value Added method vs Income Method of Measurement of National Income

Comparison-Value Added Method vs Income Method.JPG

Example 24

From the following information, estimate:

(i) Value of output;

(ii) Net value added at factor cost;

(iii) Prove that income generated is equal to net value added at factor cost.

Particulars  ₹ in Crores 
(i) Increase in unsold stock  600
(ii) Sales  10,625
(iii) Purchase of raw materials  2,625
(iv) Indirect Taxes  1,200
(v) Subsidies  400
(vi) Operating surplus  3,740
(vii) Mixed incomes  100
(viii) Wages and Salaries  3,460
(ix) Depreciation  500


In this question, we have to Calculate National Income using both

Value Added Method and Income Method

Value Added Method

Example 24.jpg

Income Method

Calculation of National Income
Different Factor Incomes  
Operating Surplus 3740
Compensation to Employees 3460
Mixed Income 100
Total (Domestic Income NDP FC 7300
Add NFIA 0
NNP FC (National  income) 7300


Question 21

From the data given below, prove that "Net Value Added at Factor Cost' is equal to 'Income Generated.

Particulars   Rs  in crores 
(i) Opening stock  200
(ii) Closing stock  400
(iii) Purchase of raw materials  300
(iv) Sales  1,200
(v) Corporate tax  100
(vi) Undistributed profits  50
(vii) Dividends  50
(viii) Rent  150
(ix) Interest  100
(x) Depreciation  200
(xi) Indirect taxes  150
(xii) Subsidies  50
(xiii) Wages and salaries  350


Question 21.jpg

Income Method

Question 21..jpg

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Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 14 years and a teacher from the past 18 years. He teaches Science, Economics, Accounting and English at Teachoo