Giving reason, explain how the following should 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
(i) The services of chartered accountant hired by the firm should not be included in the estimation of national income. This is because it forms a part of the firm’s intermediate consumption.
(ii) Corporate profits already form part of national income. Hence Payment of corporate tax is not included in the national income as it is a mere transfer payment from the firm to the government.
(iii) Purchase of refrigerator by a firm for own use will be included in the national income as it is regarded as final consumption expenditure.
