Production Method
The production method is a method of obtaining the value added by starting from the value of goods and services created in the production process and eliminating the value of intermediate goods and services invested in the production process. The formula for calculating the value added of each industrial sector of the national economy is as follows:
Value Added = Total Output I Intermediate Inputs
The value added of the production method in each industrial sector of the national economy is added together to obtain the GDP of the producing France.
(1) Gross output refers to the value of all goods and services produced by a resident unit in a given period of time, including both value added and value transferred. It reflects the total scale of production activities of resident units. Different industries have different methods of calculating total output, which can be broadly categorized into five types. The first category is calculated according to the product method and is expressed in the form of output value. For example, gross output value of agriculture, gross output value of industry, and gross output value of construction. Which due to the factory method of calculation of industrial output value does not include value-added tax, while the value added including value-added tax, so the calculation of total industrial output also need to be adjusted accordingly, that is, the total industrial output = total industrial output value + sales tax; the second type of calculation according to the provision of services in the form of gross profit (i.e., the difference between the commercial import and export price), such as the total output of the wholesale and retail trade industry = commercial surcharges; the third type of calculation of business income, such as Transportation, warehousing and postal services, accommodation and catering, and for-profit enterprises in the social services industry; the fourth category is calculated on the basis of virtual service income + actual service fee income, such as the financial industry (mainly including the banking and insurance industries) and the real estate industry; the fifth category is calculated on the basis of recurring operating expenses + virtual depreciation, such as not-for-profit administrative establishments.
(2) Intermediate inputs refer to the value of non-fixed-asset goods and services consumed and used in the production process of a permanent establishment over a certain period of time. Intermediate inputs, also known as intermediate consumption, reflect the value of transfers used in the production process. Goods and services included in the calculation of intermediate inputs must meet two conditions: they must be consistent with the scope of the calculation of total output; and they must be used on a one-time basis in the current period.
(3) Value added, which is the difference between total output minus intermediate inputs, reflects the final results of the production and business activities of each industrial sector in a certain period of time.
Income Method
The income method, also known as the distribution method, accounts for the results of the production activities of permanent establishments from the point of view of the formation of income from the production process. The value added of the income method in each industrial sector of the national economy consists of four components: labor compensation, net production tax, depreciation of fixed assets and operating surplus. The formula is:
Value added = compensation of workers + net production tax + depreciation of fixed assets + operating surplus
The sum of the value added of each industrial sector of the national economy under the income approach is equal to the gross domestic product of income France.
(1) The remuneration of laborers refers to all the remuneration received by laborers for engaging in productive activities. It includes all forms of wages, bonuses and allowances received by the laborer, both in money and in kind. It also includes public medical and health care, transportation allowances for commuting to and from work, and social insurance and housing fund contributions made by the employer for the worker. For the self-employed economy, it is not easy to distinguish between the labor remuneration and business profits received by its owners, and these two parts are treated uniformly as workers' remuneration.
(2) Net production tax refers to the difference between production tax minus production subsidies. Production tax refers to all kinds of taxes, surcharges and fees levied by the government on production units engaged in production, sales and business activities, as well as on the use of certain factors of production (e.g., fixed assets, land, labor) for engaging in production activities. These include sales taxes and surcharges, value-added tax (VAT), various taxes expended in management fees, road maintenance fees payable, sewage and utility surcharges, and special revenues paid to the government by the tobacco and alcohol monopolies. Production subsidies, contrary to production taxes, refer to unilateral transfer payments from the government to production units and are therefore considered as negative production taxes, including policy loss subsidies and price subsidies.
(3) Depreciation of fixed assets refers to the depreciation of fixed assets for a certain period of time in order to make up for the depletion of fixed assets in accordance with the prescribed depreciation rate of fixed assets, or depreciation of fixed assets calculated virtually according to the depreciation rate uniformly prescribed by the national economic accounting. It reflects the transfer value of fixed assets in current production. Depreciation of fixed assets of all kinds of enterprises and enterprise management institutions is the actual depreciation charge; depreciation of fixed assets of government agencies, non-enterprise management institutions and residential housing which are not depreciated is the virtual depreciation calculated in accordance with the uniformly stipulated depreciation rate and the original value of fixed assets.
(4) Operating surplus refers to the balance of value added created by resident units after deducting labor compensation, net production tax and depreciation of fixed assets. It corresponds to the operating profit of the enterprise plus the production subsidy.
Expenditure Method
Expenditure French GDP is a method of reflecting the final results of productive activities in a country (or region) over a certain period of time from the point of view of end use. Final use includes final consumption, gross capital formation and net exports. Calculation formula for:
Expenditure France GDP = final consumption + gross capital formation + net exports (exports - imports)
According to the three methods of calculation of the GDP reflects the same overall in the same period of the results of productive activities, so theoretically, the three methods of calculation of the results obtained should be consistent. However, in practice, due to the influence of the caliber range of the source and the calculation method, there will be a certain statistical error. At present, it is usually based on the production method or the income method, and the three methods are validated against each other and the statistical error is controlled within a certain range.