Class:X/1

Chapter:
INCOME METHOD JIJJJ fitfit-
 IINCO.M IE M IET1
H OD/ 1

THIS METHOD
.1114 ~ •IOI.fl Qcfi
MEASURES
NATIONAL INCOME <-la, ri ~ ~
AS THE SUM TOTAL ~ e:f<i..f Qcfi
OF FACTOR INCOMES
.11tfo,qqftil ~
GENERATED BY THE
NORMAL RESIDENTS .fflltlrll ~41~~
OF AN ECONOMY aaa=t,
DURING AN
.. 31fla cfii<cfi

ACCOUNTING YEAR. 3114 ~~ ~ ~

* ~ '111cft t I
 FACTOR INCOMES: Income earned by factors of production for
rendering factor services for production of goods and services.
cfii<cfi 311 li : 3c-4Iacr1 cli" cfit=tct,) aa,=t,
.. af-c131T
.:,
3tt=t'
lTTIT31T cli"
3c-41Grf cl;- fi:rQ- cfil-{cfi ~31T ~ .,.~q1ar1 aa,=tl .:ff~ c1 Jtl li
.

CAPITAL/ ~ ----------'
INTEREST
__i4
_ i"1
_ _--i PROFIT
RENT
11\;:t I:q I
-----t WAGES
IDENTIFICATION AND CLASSIFICATION OF PRODUCING
ENTERPRISES WHICH EMPLOY FACTOR INPUTS
ct,,:(ct, ltl•lffi ~ 3q:qla1 ct,.(;l 4iJI 3<"'fit..t $cfil$:ql
~ q8ill..t cf ~I d•ffcfi.(01
CLASSIFICATION OF FACTOR INCOME
~3111Jlln'41lt.(vi

ESTIMATION OF FACTOR INCOME

cfii<cfi 311 ;q ~ 31ij6tl..t

ESTIMATION OF NATIONAL INCOME

<i~;q 311:q ~ 31-j6tl..t
1. Wages And Salaries 1. -H~~.fl ~ aa;;,
a) In Cash a) crtcfi~ ~
b) In Kind b) rctit=J-t ~

2. Employer's 2. ti Iii If:;1 ch Wa=rT

Contribution To Social
lfl"1oil3TT * ~
~lflcfc113TT ~ql{I
Security Schemes ..
lfla1~1;;,
3. Retirement Pension 3. ~ctl~ctfa ~rc;,
C.
Ql . Which of the following is not a component of compensation
of employees?
~ ~ ifi1ii.ftl cfiAii1fi'-l'i $" tflftJJtfllif, ifiT Qcfi tlccfi ~ t
A. SALARIES/ clc1crl
B. RETIREMENT PENSION/ ~cit~~ ~Taf
C. OLD AGE PENSION/ ci~lllci.f-~ ~Taf
(. -
D. EMPLOYER'S CONTRIBUTION TO PROVIDENT FUND/
~<ftcfc11.3rr ectl{I ~fcltS,Q ~ftl· 1l lfldl~lcrl
1

ANS: C
Q2 . Amar works as a senior manager in a private limited company.
His monthly contribution to his provident fund will be added to
compensation of employees. (True/ False)

Ans: False/ a, ~ci

 OPERATING SURPLUS (OS)
',I ii Itit crf lrfin)'lr

1. Rent And Royalty 1. 1\i<i41 3fft <14<--ll

2. Interest 2. c4ia
3. Profit 3. t'illf
► Corporate Tax/ Profit ► f.la111 iR / l'il3f
Tax iii'{
► Dividend ► t'i 11t ,~r
•

► Undistributed Profit/ ► 3t~c1~c1 t'illf/

Retained Earning gffit41~c1 3'T1f
Q3 . If profit is 1400, corporate tax is 200 and retained
earnings are 11501 find dividends.
~ i-lllf 1400, ~.iilf cfil 200 d~I \l~lil~it ~14
1150 t, irr <'lllti~r ~cfit~.a

ANS:
PROFIT= CORPORATE TAX+ RETAINED EARNINGS+ DIVIDENDS
<-Iii<= f.la,.,. cR + \lfc!llil~ct 3mf + c-tllti-r
•
⇒ 1400 = 200 + 1150 + DIVIDENDS/ il11lnT
•
⇒ DIVIDENDS/ <'liltt,r= 1400- 200-1150
•
⇒ DIVIDENDS / ~T == 50
Q4. Following is not a part of operating surplus-
t
~• ol \lill<atit 31fln)'1r iliT ltitii ;nff

A. RENT/ 1%.(i.QI
B. WAGES/ ao.:t
C. INTEREST/c,.Qlat
D. PROFIT/ t-lllf

ANS: B
 MIXED INCOME OF SELF EMPLOYED {Ml)
~~~- cf:r ~ ~ 'll"l!""IT'

MIXTURE OF ALL THE

FACTOR INCOMES

EARNED BY SELF

EMPLOYED PEOPLE WHO

DO NOT KEEP SEPARATE

ACCOUNT FOR EACH.

 QS. Mixed Income Of Self Employed Means
<af.l.Q'l~ffi ~ f14f-;lc1 311-1.1 q;J 3ft t
a. Gross profits of enterprises/ 3~4M
... cl;' .ftcfit'f <'lilt"
b. Rent, interest and profit of an enterprise/1%{141, Rll'71
dtli 344'1
... cfiT t'fili'
c. Combined factor incomes which are not distinguishable/
=t1'1,cfd cfil{cfi 3ITTf Ql-1ct,) a•fftc1 ~ f%.q1 ~ .ftc:f,dl
d. Wages of family members/ qf\ql{ cl;° .ft~<~ cfiT ~<1-1

Ans : c
Q6 . Mixed income does not include transfer incomes received by
family members.

True/false

~ /a1c4a

Ans: True/ ~
 ~

DOMESTIC INCOME (NDPFc )

- - - - -~311_4 _ _ _ _~
TO OBTAIN NATIONAL INCOME
(i•c!l4 3114 \IICfi qi:(9' ~ ffrv
-

-
 cfii<cfi Cit iii Ic1
DOMESTIC
lit ~qt-I
INCOME
~ 3("q14

NET
DOMESTIC
- PRODUCT AT ~ltl.Q
FACTOR COST
NDPFc
 raa,~ *
31~<1 ~qt'I
cfiF(cfi 3tl~

NFIA
NET FACTOR
INCOME
FIFA- FITA
FROM
ABROAD
 •

Q7. CLASSIFY THE FOLLOWING INTO

DEL E
- OS AND Ml
~ e s and salaries
a
rf '?f <i-< r <1 tt I <1 cr1
I COE I
20 Royalty
-ll.QC"t)
~
3 . . Earnir,u?s of a tailor
worl<1ng rom home
Ml
~~~cf,~cfi{cA ~-Qq;-
__._
4. Earnings of a farmer
Ml
Qcf, t~ cf, ~ 3ml

5. ComQany's contrib.utian to
employee prov,aent tuna I COE I
~cif'*~~1~<fjit1{) ~ -~~va-g-c::
Q8. If domestic income is, 2450 and national income is,
2300 then N FIA will be
~ ~ 3titt , 2450 t° ~ <i•~tt 3titt , 23oo tm
NFIA ~<1itl ~

a. =( 150
b. :( (-)150
c. ~ so
d. :( (-)50

ANS: b
 Some Precautions while using income metho
3111.4 fc?,ftt cf;T 3q41,, cfi<cl .ffltq 'f1J
.ff 1qt, .~"4i
1. Transfer incomes like old age pension, scholarships are not included. ~
'l!'.111<1.fll, ihr.r, oril'{f.' ~ tcfaic1{01 3ml ,11111 .i ;;rtt ;flt ••mft , J
2. Income from sale of second hand goods is not Included.

3. The commission earned from sale/purchase of second hand goods is

J
included.

4. Income received from illegal activities are not included.

-
 -
Some Precautions wh ile using income method
3f17f fclfil·
c::ii. •
cf;T 3q.Q'la1 cfi=t~ .ffJt,Q cfiu
.:,
...,.ff""Ia~t,1•"''141,.,:q
~....,

5. Income from sale/ purchase of shares and bonds is not included

]
6.Brokerage received from sale/ purchase of shares and bonds is included.

~l4<l ~ -,·~.. ifr fl#l / a.fl~ ll° \ll'i-1 -~cfi\'71 ,lliltt'f ifr a,cn t I J
7. Windfall gains like lottery etc. are not included.
- !
llictitlitcti t'iilt ~ t'ilc:fl ~ t11flt" -nff' f.\;41 a1c11 t 1

8.lmputed rent of owner occupied houses is included.

itlf":tcfil a,_al:tl ~-cfilfl'?f ~ cliT lti<l~ci r..,.(141 ""flt t'i f%:q1 '711.cil !:J
Ql. Explain the steps involved in estimating national income by income method.
02. State the components of compensation of employees.
03. How w ill the following be treated in estimating national income? Give reasons for
your answer
i. Interest paid to household by banks on the ir savings.
ii. Interest pa id on loan taken from a fri end.
iii. Interest paid on loan taken to purchase a taxi.
iv. Interest paid by an individual on car loan.
04. Calculate national Income from the following data
1. Compen sation of employees 600
2. Rent 100
3. Profit 80
4. Mi xed income 200
5. Interest 120
6. NFIA (-) 10
7. NIT 110
as. If profit= 1250, dividend= 250, profit tax = 300, then what are retained earn ings?
a1. 3ml ~Rt a <•~4 3ml * ~,cfi<'f.., # ~111)1<'f il<u,Y ~ c.4,~, <ftQQ ,
a2. ct,,liuft:dl
Q3. f.),_.., *
*tnft'Sfl)lcfi
<t1iti <1~4 3ml
**
tlc.ct,l cfiT 3<"~& cftQC! I
:,4icfi<'f"1 1f cF41 c.4d(CI< fc\;41 \Jtjl.!•11? cfij,(Uj •ctr$Q
i. ~ 4_di<i 'ltc~ ~ 3..,cft •qe1 q"{ ~ •141 &Qi.ii
ii. fmr a
~ m?' _u, q"{ ~ •141 -41.il
iii. ~cfffl &f14;l ~ ~ 11V _o, q"{ ff~ ~ •141 a.QI.ii
iv. Vet," a,fli:i 4_41<1 cfii< _u, q"{ ~cfil41 141.il
a4. f.),-.., ~icii~~ a <•~4 ~ ~ .,u,..,, <ftQQ
1. ctiAdl~cil ~ q1f't,,iMifi 60 0
2. fc\;,(141 100
3. ci1ilt 80
4. ~ 3114 200
5. RU.ii ~ - --~ 120
6. ~If a
f.)atil cfii<cfi lmf(NFIA) {- ) 10
7. f.)a,<'f ~ cfi'<' ( NIT) 110
Q5.~ ifT1f =1250, mlmT =250, <'Ilk cfi'<' =300, cft q~t,1fte1 3ml f\.e1.ft ~ ?
 CRITICAL THINKING
lITTf

Thougt, salary ear,1,ed

by ,an ln,dian resident
working in a :branch of
a foreign company in
!India is included i n
1

domestic income of
r1dia, sallary earn,ed by
il1
an Indian resider,t
w or:kingin an e1
1
mbassy
ir1 India is 1 1ot. Wl1y?