Check sibling questions

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

Sheet 5..jpg

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

Income Methode.jpg

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

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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