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Learn how to calculate the Gross Domestic Product using the value-added approach at each stage of production.
Theoretically, GDP can be viewed in three different ways: The production approach sums the “value-added” at each stage of production, where value-added is defined as total sales less the value of intermediate inputs into the production process. For example, flour would be an intermediate input and bread the final product; or an architect ...
Figure 1: Output vs. value added The national accounts allow to calculate the GDP in three ways: output approach, income approach and final demand approach. These three approaches show the same indicator from different perspectives. The most applicable and reliable method to calculate the gross value added of a company is the output approach.
4.2 Value Added Approach. Another approach to estimating the value of final production is to estimate the value added for each stage of production. This will be the amount by which the value of a firm’s output exceeds the value of the goods and services the firm purchases from other firms.
31 Δεκ 2001 · Provides a useful summary of research on value added (VA) reporting and shows how income statements can be rearranged to show gross or not (of depreciation) VA.
The value-added approach helps to avoid double counting by only accounting for the value added at each production stage, rather than the total sales of goods. In this method, a firm's total sales are reduced by its purchases of intermediate goods to determine its value added.
In the 1950s, the development of input–output accounts by Leontief and others provided a conceptual framework for estimating the size of the economy by an income measure, by an expenditure measure, and also by a third method—a value-added measure.
