State any two precautions to be adopted while estimating National Income by Income Method. Distinguish between 'Value of Output' and 'Value Addition'.

Question

Accepted Answer

Precautions for Income Method:
1. Transfer incomes (scholarships, pensions, gifts) should not be included as they are not connected with productive activity.
2. Income from sale of second-hand goods should not be included as they were counted in the year of original production.

Difference between Value of Output and Value Addition:
Value of Output = Sales + Change in Stock (market value of all goods produced)
Value Addition = Value of Output - Intermediate Consumption
Value of Output includes intermediate goods consumed in production, while Value Addition shows only the net contribution of the enterprise.