Giving reason explain how should the following be treated in estimatio

1.	Giving reason explain how should the following be treated in estimation of national income:(i) Expenditure by a firm on Payment of fees to a chartered accountant.(ii) Payment of corporate tax by a firm.(iii) Purchase of refrigerator by a firm for own use.
Answer» (i) Expenditure by a firm on payment of fees to chartered accountants - It not included in national income because it is an intermediate cost for the firm. (ii) Payment of corporate tax by a firm- It is a transfer payment by the firm to the Government. It is paid out of income and therefore, not to be separately added in the estimation of national income. (iii) Purchase o refrigerator by a firm for own use- Purchase of refrigerator by a firm is included in national income because it is an investment expenditure or capital formation. A refrigerator is used by the firm for several years.

Giving reason explain how should the following be treated in estimation of national income:(i) Expenditure by a firm on Payment of fees to a chartered accountant.(ii) Payment of corporate tax by a firm.(iii) Purchase of refrigerator by a firm for own use.

Answer»

(i) Expenditure by a firm on payment of fees to chartered accountants - It not included in national income because it is an intermediate cost for the firm.

(ii) Payment of corporate tax by a firm- It is a transfer payment by the firm to the Government. It is paid out of income and therefore, not to be separately added in the estimation of national income.

(iii) Purchase o refrigerator by a firm for own use- Purchase of refrigerator by a firm is included in national income because it is an investment expenditure or capital formation. A refrigerator is used by the firm for several years.

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