From the data given below, prove that ‘Net Value Added at Factor Cost’ is equal to ‘Income Generated’.
From the data given below, prove that ‘Net Value Added at Factor Cost’ is equal to ‘Income Generated’.
| Particulars | ₹ in Crores |
| (i) Opening Stock | 200 |
| (ii) Closing Stock | 400 |
| (iii) Purchase of raw materials | 300 |
| (iv) Sales | 1,200 |
| (v) Corporate tax | 100 |
| (vi) Undistributed profits | 50 |
| (vii) Dividends | 50 |
| (viii) Rent | 150 |
| (ix) Interest | 100 |
| (x) Depreciation | 200 |
| (xi) Indirect taxes | 150 |
| (xii) Subsidies | 50 |
| (xiii) Wages and Salaries | 350 |
Ans – Net Value Added at Factor Cost = Income Generated = ₹ 800 Crores
Anurag Pathak Changed status to publish December 21, 2023
Solution:-
Calculation of Net Value Added at Factor Cost
Value of Output = Sales + Change in Stock (Closing Stock – Opening Stock)
Value of Output = ₹ 1,200 + (₹ 400 – ₹ 200)
Value of Output = ₹ 1,400 Crores
Gross Value Added at MP = Value of Output – Intermediate Consumption (Purchase of Raw Materials)
Gross Value Added at MP = ₹ 1,400 – ₹ 300
Gross Value Added at MP = ₹ 1,100 Crores
Net Value Added at FC = Gross Value Added at MP – Depreciation – Net Indirect Taxes (Indirect tax – Subsidies)
Net Value Added at FC = ₹ 1,100 – ₹ 200 – (₹ 150 – ₹ 50)
Net Value Added at FC = ₹ 800 Crores
Calculation of Income Generated
Income Generated (NDP at FC) = Compensation of Employees (Wages and Salaries + Employer’s Contribution to Social Security Scheme) + Mixed Income + Rent + Interest + Profit (Corporate tax + Dividends + undistributed profits)
Income Generated (NDP at FC) = (₹ 350 + ₹ 0) + ₹ 0 + ₹ 150 + ₹ 100 + (₹ 100 + ₹ 50 + ₹ 50)
Income Generated (NDP at FC) = ₹ 800 Crores
Thus,
Net Value Added at Factor Cost = Income Generated = ₹ 800 Crores
Anurag Pathak Changed status to publish November 10, 2023
