According to Simon Kuznets, National Income accounting of a country is calculated by three methods. In this method, net value of final goods and services produced in a country during a year is obtained, which is called total final product. This represents Gross Domestic Product (GDP).
Net Income earned in foreign boundaries by national is added and depreciation is subtracted from GDP. It is also called value added method. In this method, a total of Net Income earned by working people in different sectors and commercial enterprises is obtained.
Incomes of both categories of people, paying taxes and not paying taxes are added to obtain National Income. By income method, National Income is obtained by adding receipts as total rent, total wages, total interest and total profit.
Consumption Method is also called expenditure method. Income is either spent on consumption or saved. Hence, National Income is the addition of total consumption and total savings. In India, a combination of production method and income method is used for estimating National Income.
