Items Not Included in Expenditure Method

Transfer Payment

It refers to any expenditure paid without receiving any goods and services in return

Example - Old age pension, donation, charity

Purchase of of Second hand goods

it is not included as amount is already covered on amount paid on purchase e of original goods

Exception - We will take commission income of brokers on sale of second hand goos

Purchase of shares and debentures

Exception - We will take commission income of brokers on sale of shares and debentures

Expenditure on Intermediate Goods

If expenditure on final goods taken, then expenditure on intermediate goods not taken

This is because value of final goods include value of intermediate goods

Example

A Sells flour to B of Rs 1000,B makes bread from it of Rs 3000 and sells it to Customer C

Now, Final expenditure of C is Rs 3000 (it includes cost of 1000 of flour also)

Expenditure of Foreign Tourists in India

Purchase by foreign tourists are exports and hence included in National Income

Items Included in Expenditure Method

Expenditure on Purchase of Capital goods (Fixed Assets)

Expenditure on Own Account production

It include expenses on self consumption

Own we occupied houses

Free Service from Govt

Free Service from Private Non profit institutions serving households (NGO)

Question

Whether following items Included in National Income

1.Purchase by Foreign Tourists

2. Food purchased by ……..

3. Payment of fees to a lawyer engaged by a firm.

4. Expenditure by a firm on payment of fees to a chartered accountant.

5. Gifts received from abroad.

6. Purchase of car by a household

7. Expenditure on advertisement by a firm

OR

8. Commodities used in scientific research

9. Purchase of machine by a factory

10. Purchase of raw material by a production unit.

OR

11. Milk purchased by a sweet shop to make milk-cake.

12. Expenditure on construction of a flyover by the government .

13. Expenditure by government on providing free education

OR

14. Expenditure on free services provided by the government

OR

15. Expenditure by government on providing free educational services

OR

16. Government expenditure on street lighting

17. Insurance premium paid by an household.

OR

18. Fees received from student.

19. Value of wood purchased for manufacturing a table.

OR

20. Expenditures on the purchase of cold drinks by a school canteen from the manufacturer.

OR

21. Transport expenses by a firm.

OR

22. Expenditure on engine oil by car service station.

23. Purchase of equipment's for installation in a factory.

24. HP uses its own new Laptops in its office for self-consumption.