What is consumption of fixed capital ? What is its treatment while calculating national income? When it is added or subtracted.explain by using example
Dear student,
Consumption of fixed capital is a related concept of depreciation. Consumption of fixed capital is equal to the sum of depreciation, expected obsolesce and accidental damages. That is
Consumption of fixed capital=Depreciation+Expected obsolesce+ Accidental damages
However, while calculating national income, both the terms are considered same.
depreciation/consumption of fixed capital is deducted from gross income to calculate net income
Consumption of fixed capital is a related concept of depreciation. Consumption of fixed capital is equal to the sum of depreciation, expected obsolesce and accidental damages. That is
Consumption of fixed capital=Depreciation+Expected obsolesce+ Accidental damages
However, while calculating national income, both the terms are considered same.
depreciation/consumption of fixed capital is deducted from gross income to calculate net income