What is Operating Surplus
We have already studied that
It is total of income from property + Income from entrepreneurship
Operating Surplus =Income from Property +Income from Entrepreneurship
Operating Surplus =(Rent + Royalty + Interest) +(Profit)
How to Calculate Domestic income using Operating Surplus
Domestic income= Rent + Royalty + Interest + Compensation to employees + Profit + Mixed Income
Domestic income= Rent+ Royalty + Interest + Profit + Compensation to employees + Mixed Income
Domestic income=Operating Surplus + Compensation to employees + Mixed Income
Second Formula of Operating Surplus
Operating Surplus=Value of Output-Intermediate Consumption-Net indirect tax-Dep-Compensation to employees-Mixed Income
Explanation
How is this formula Derived ?
We know that as per Value Added Method
We derive Domestic Income and National Income as follows
Hence as per Value Added Method
Value of Output-Intermediate Consumption-Net indirect tax-Dep=NDP FC
Also we have Studied that as per income Method
Income Method
Hence
Operating Surplus + Compensation to employees + Mixed Income = NDP FC
NDP FC =Operating Surplus + Compensation to employees + Mixed Income
So we have 2 equations
Value of Output-Intermediate Consumption-Net indirect tax-Dep=NDP FC
NDP FC = Operating Surplus + Compensation to employees +Mixed Income
Putting the value of Second equation in first
Value of Output-Intermediate Consumption-Net indirect tax-Dep=Operating Surplus + Compensation to employees + Mixed Income
Value of Output-Intermediate Consumption-Net indirect tax-Dep-Compensation to employees-Mixed Income=Operating Surplus
Operating Surplus=Value of Output-Intermediate Consumption-Net indirect tax-Dep-Compensation to employees-Mixed Income
Operating Surplus=Value of Output-Intermediate Consumption-Net indirect tax-Dep-Compensation to employees-Mixed Income
(WHATEVER IS NOT GIVEN IN QUESTION,TAKE AS 0)
Example 26.
Calculate the Operating Surplus.
| Particulars | ₹ in Crores |
| (i) Value of output | 70,000 |
| (ii) Purchase of raw material | 18,000 |
| (iii) Net indirect tax | 3,000 |
| (iv) Wages and salaries | 25,000 |
Answer
Operating Surplus=Value of Output-Intermediate Consumption-Net indirect tax-Dep-Compensation to employees-Mixed Income
Operating Surplus = 70000 - 18000 -3000 - 25000
Operating Surplus = 24,000
What is Operating Surplus
It is total of income from property + Income from entrepreneurship
Operating Surplus =Income from Property +Income from Entrepreneurship
Operating Surplus =(Rent + Royalty + Interest) +(Profit)
hence, if Rent, Royalty, Interest and profit are also given in question
They are not to be taken
Question 23
Calculate operating surplus.
| Particulars | ₹ in crores |
| (i) Bonus to employees | 25 |
| (ii) Mixed income | 175 |
| (iii) Profit | 100 |
| (iv) Dividend | 40 |
| (v) Corporate tax | 30 |
| (vi) Rent | 80 |
| (vii) Royalty | 40 |
| (viii) Interest | 130 |
| (ix) Employers' contribution to social security schemes | 30 |
Answer
In this Question, we are not given Sales or Intermediate Consumption
So ,we Calculate Operating Surplus using Normal Formula
Operating Surplus =(Rent+ Royalty+ Interest) +(Profit)
Operating Surplus = 80 + 40 + 130 + 100 = 350 Crores
Question 24
Calculate the value of operating surplus.
| Particulars | ₹ in croses |
| (i) Value of output | 800 |
| (ii) Intermediate consumption | 200 |
| (iii) Compensation of employees | 200 |
| (iv) Indirect taxes | 30 |
| (v) Depreciation | 20 |
| (vi) Subsidies | 50 |
| (vii) Mixed income | 100 |
Sometimes in question
GDP at MP is given instead of Sales and Intermediate Consumption
We have already studied in Value Added Method that
Sales-Intermediate Consumption=Gross Value Added
Sales-Intermediate Consumption=GDP at MP
Now, for calculating Operating Surplus
Operating Surplus=Value of Output-Intermediate Consumption-Net indirect tax-Dep-Compensation to employees-Mixed Income
Operating Surplus=GDP at MP--Net indirect tax-Dep-Compensation to employees-Mixed Income
Question 25
Calculate the operating surplus.
| Particulars | ₹ in crores |
| (i) Compensation of employees | 200 |
| (ii) Indirect taxes | 200 |
| (iii) Consumption of fixed capital | 100 |
| (iv) Subsidies | 50 |
| (v) Gross domestic product at MP | 600 |
Answer
Operating Surplus=GDP at MP-Net indirect tax-Dep-Compensation to employees-Mixed Income
Operating Surplus = 600 - 150 -100 - 200
Operating Surplus = 150
Question 26
Calculate operating surplus and compensation of employees.
| Particulars | ₹ in crores |
| (i) Indirect taxes | 250 |
| (ii) Depreciation | 200 |
| (iii) Royalty | 20 |
| (iv) Profit | 200 |
| (v) Subsidies | 50 |
| (vi) Gross domestic product at MP | 1,800 |
| (vii) Interest | 50 |
| (viii) Rent | 100 |
| (ix) Net factor income from abroad | (-) 40 |
Answer
In this question,
We need to calculate 2 things
Operating Surplus
Compensation to Employees
Step 1- Calculate Operating Surplus
We Calculate Operating Surplus using Normal Formula
Operating Surplus =(Rent + Royalty + Interest) +(Profit)
Operating Surplus = 100+20+50+200 = 370
Step 2-Compensation to employees
for This, we use second formula for Operating Surplus
Operating Surplus=GDP at MP-Net indirect tax-Dep-Compensation to employees-Mixed Income
370 = 1800-200-200- Compensation to Employees-0
Compensation to Emp = 1800-200-200-370
Compensation to Emp = 1030
