How To Calculate Personal Income

Table of contents:

How To Calculate Personal Income
How To Calculate Personal Income

Video: How To Calculate Personal Income

Video: How To Calculate Personal Income
Video: Class 12 Macroeconomics Personal Income (National Income Accounting) with numerical example 2024, March
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Personal income means a certain cash income of a working person, which consists of salaries and additional funds. Including it includes in its composition: dividends, rent, premiums, interest and transfers. It is calculated before taxes.

How to calculate personal income
How to calculate personal income

Instructions

Step 1

Personal income always differs from national income in that it is the total profit received by the owners of monetary or other economic resources. To calculate personal income, it is necessary: subtract from the national profit all funds that are not at the disposal of households, that is, they are part of the collective income, and then add a value that increases their income, but is not included in national income.

Step 2

Determine personal income using the following formula: personal income = total national income - taxes paid on corporate profits - social security contributions - retained earnings of the pool + interest on existing government bonds + transfers.

Step 3

You can calculate personal income using other formulas as well. Thus, personal income = national income - corporate profits - contributions spent on social security + dividends + interest on existing government bonds + transfers.

Step 4

In addition, there is personal disposable income, which is a type of total income. It is used by households. Moreover, this income is less than personal income by the amount of individual taxes paid by the owners of economic resources in the form of direct (income) tax amounts.

Step 5

In turn, households spend their own disposable income on savings and consumption. In this case, disposable personal income is equal to the sum of savings and consumption.

Step 6

At the same time, savings can be of different types. Personal or household savings can be calculated as the difference between personal disposable income and spending on personal consumption. Business savings include: retained earnings and amortization of the company, which serve as certain internal sources of finance, as well as the basis for expanding the functioning of the company.

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