what is the difference between Corporation tax and profit while calculating national income by expenditure method??

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Solution

Dear student,

Profit is the amount of money earned by the owner of a production unit for his entrepreneurial abilities.
This earned profits has to be distributed by the production unit in three ways :
1. income tax to the government: this is known as corporate tax.
2. dividend to shareholders
3. retained earnings of entrepreneur. This is known as undistributed profit.

When calculating National income, the total profit is added. Total profit consists of corporate tax, dividend and retained earnings.

Regards,

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Similar questions

Which of the following is not included in expenditure method of calculating national income?

(a) From the following data compute net value added at factor cost:

$\begin{matrix} Items & Domestic sales & Subsidies & Purchase of raw material & Exports & Depreciation & Import of & Net in domestic market & indirect taxes In Crores & 2500 & 40 & 500 & 200 & 100 & 600 & 60 \end{matrix}$

(b) Intermediate goods and corporate tax are included in national income indirectly. How ?

Calculate $G N P_{m p}$

(a) By Income Method

(b) Expenditure Method

$\begin{matrix} (a) & Rent & 40 (b) & Private Final Consumption Expenditure & 800 (c) & Net Exports & 20 (d) & Interest & 60 (e) & Profit & 120 (f) & Government Final Consumption Expenditure & 200 (g) & Net Domestic Capital Formation & 100 (h) & Compensation of Employees & 800 (i) & Depreciation & 20 (j) & Net Indirect Taxes & 100 (k) & Net Factors Income From Abroad & (-) 20 \end{matrix}$

Q. Explain the precautions that should be taken while estimating national income by expenditure method.

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