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Discuss the transactions relating to flow of income and its disposition.

Discuss the transactions relating to flow of income and its disposition.

Course: B.Com
1 Answer
Classification of transactions relating to the flow of income and its disposition:

Output can be looked from another point of view flow of income, flow between producers and the suppliers of factors of production, the components of gross incomes are as follows:

  • Compensation of employees: It refers basically to the total gross wages paid by employers to employees for work done in an accounting period. It may be in cash or in kind. It also includes the employers contribution to social security schemes and to private pension family allowance etc.
  • Operating surplus and withdrawals from entrepreneurial incomes: Operating surplus is income from industries. It is estimated as producer’s value of outputs of industries less value of intermediate consumption and compensation of employees.
  • Consumption of fixed capital: Consumption of fixed capital represents the mount of fixed assets used up, during the period under consideration, as a result of normal wear and tear and foreseeable obsolescence.
  • Indirect taxes: Charge levied by the State on consumption, expenditure, privilege, or right but not on income or property. Customs duties levied on imports, excise duties on production, sales tax or value added tax (VAT) at some stage in production distribution process, are examples of indirect taxes because they are not levied directly on the income of the consumer or earner.