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Describe income method. |
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Answer» Solution :According to income METHOD, national income is measured in terms of payment made to the primary FACTORS of production. The main components of factor income are , COE, OS and MI Here, (a) Compensation of amployees (CoE) refers to the amount paid to the employees for rendering productive services, it is wages in cash and kind amployer's contribution to SSS. (B) Operating surplus (OS) is the sum total of income from property and income from entrepreneurship. Its components are : (i) Rent refers to the income earned for use of capital assets like land, BUILDINGS, machinery etc. (ii) Royalty refers to the income received for leasing the rights of mining and for granting the rights of using patents, copyrights and trandemarks. (iii) Interest refers to the amount received for lending capital for production purpose. (iv) Profit is the reward to the entrepreneur for his factor services in the production of goods and services. It is Dividend + Corporation TAX + Corporate savings (c) Mixed income (MI) refers to the income generated by own account workers and unincorporated enterprises who do not maintain books of accounts. `N NP_(FC)=COE+OS+MI+NFIA` |
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