Briefly explain the following basic concepts related to NI:
Value of Output vs. Value Added

(i) Value of output. The goods and services produced by an enterprise during an accounting year constitutes its output. (Output is also called gross output because it includes depreciation.) Value of output of an enterprise is the market value of all the goods and services produced by an enterprise during an accounting year. (Mind, value of output means value of gross output at MP unless stated otherwise.) Money value of output of an enterprise is obtained by multiplying its physical output of goods and services with its market price.
Symbolically:
Value of output = Quantity of output × Price
Alternatively value of output can be expressed as sum of sales and change in stock because output is either sold or accumulated as unsold stock.
Symbolically:
Value of output = Sales + Change in stock
In short value of output is money value of (i) Gross output calculated at (ii) Market prices. It includes values of intermediate goods like raw material,etc.
Remember, value of output is not the actual contribution of the enterprise in the production process, because this amount includes also the value of intermediate goods which the enterprise has purchased from other producing units. So a firm's actual contribution is its value added in the production process.
(ii) Value added. It refers to the addition of value to the raw material (intermediate goods) by a firm by virtue of its productive activities. Alternatively, value added is defined as the difference between value of output of a firm and value of its inputs bought from other firms. Thus value added is firm's contribution to the flow of final goods and services produced by it during a period of account. Alternatively, value added is a measure of firm's contribution to domestic product.
For production of goods and services a firm uses two types of inputs — factors inputs (services of land, labour, capital, enterprise) and non-factor inputs (i.e., intermediate goods like raw material). A firm purchases intermediate goods from other firms and hires factor services to produce goods and services. During production process, raw material purchased from other firms is completely used up. Thus a firm merely adds value to intermediate goods when it transforms available intermediate goods into final goods (output) with the help of factors of production. This is called value added by a firm. Hence to find out value added by a firm, value of intermediate inputs (i.e., intermediate consumption) should be deducted from value of firm's output because intermediate inputs are not produced by it but purchased from some other firms.
Symbolically:
Value added = Value of output - Intermediate consumption
Simply put, excess of value of output over value of intermediate inputs purchased from other enterprises is called value added.
(iii) Steps to get 'Net Value added at FC' from Value of output. Recall value of output is the market value of gross output produced by an enterprise in an accounting year. Being gross, it includes depreciation and being at MP, it includes net indirect taxes. Following steps are taken to derive net value added at FC from value of output. (Mind, output means gross output.)

Value of output = Output × Market price
Gross value added at MP = Value of output - Intermediate consumption
Net value added at MP = Gross value added at MP - Depreciation
Net value added at FC = Net value added at MP - Net indirect taxes
(Net value added at FC = Sum of factor incomes)
In short, by substracting intermediate consumption, depreciation and net indirect taxes from value of output, we get NVA at FC.