Describe the methods used to calculate value added. How does value Essay - 4

Describe the methods used to calculate value added. How does value added contribute towards understanding the connections betwee - Essay Example Value added concept of income measurement has been viewed as the increase in the wealth of an economic body. It is traditionally rooted to the evaluation of national income in macro economics, measured by national economy productive performance.2 This concept is referred to as National or Domestic product and represents a specific period’s national economy. This is a common use of this concept but it has also been applied in many other different areas of business operations and economics as a positive performance and economic gauge. This makes value added a measure and indicator of an economic entity’s performance and has a fairly long period of application in the field of economics.3 Value added represents a calculated value, and for this reason, it is well related to accounting. It is also contrasted from the traditional calculation of income in that, it can be and has been used in all the three accounting systems i.e. managerial accounting, financial accounting and t he national accounting system. It is also distinguishable from income computation whereby value added is constantly described internationally as a difference of expenses from revenues. It can be defined in two ways that will be discussed below and this gives value added concept another critical characteristic commonly known as the dichotomy of value added.4 Subtractive method is the first method of calculating the value added and it is defined as: Value Added (VA) = O – I. Where O = Output; I = Input. This means that when being compared to accounting income, it is perceived as the net figure. The value expressed is the value that an economic body, such as a person, an industry or a company adds to the products and services it purchased or received from other entities during its creative or own productive economic activities.5 In the second one, additive method, the value added is represented by the total sum of the distributed parts that constitute the created wealth. This is done with respect to the reality that all the created wealth is well distributed i.e. by being allocated in some way. When considering a company, value added calculation is defined as: VA (Value Added) = RE + RG + RCP + NAP. Where RE = Remuneration of employees; RG = Remuneration of government; RCP = Remuneration of capital providers; NAP = not appropriated income i.e. retained earnings.6 The two formulas above disclose the characteristic content that value added concept has. This concept can be divided into social aspect, represented by the additive method, and performance aspect which is articulated by the subtractive method. This shows that in addition to economic information given by this concept, value added also offers social information through identification of the part of the yield that goes to every contributor of the whole process in a company.7 Value added concept has evolved besides its historical principal function in national accounting to several other uses and appl ications in the three; financial, national and managerial accounting. The two sided feature of value added i.e. performance and social characteristic, is depicted clearly by the concrete and possible applications. Hence it has been argued as a way to estimate productivity of an economic body through their way of using productive factors.8 This makes the

How the Lack of Technical and Financial Means Prevent Sustainability Essay

How the Lack of Technical and Financial Means Prevent Sustainability in Developing Countries - Essay Example Such communications are necessary for international trade and the import and export of goods. Business operations would no longer be limited to the home nation alone, but would open the entire world to what that nation has to offer. Such technological innovations would also broaden the range of stakeholders who have an interest in information and communication developments (Souter, p. 5). When developing countries begin showing continual promise, investors can find wonderful opportunities within that country that convinces them to invest money in that economy. When that money is invested, the economy benefits as well. Such actions tend to persuade others to do the same, which can then add a popular trend to investing in that particular market. The World Trade Order states that commercial interests do not take priority over development. They know that freer trade boosts economic growth and that that economic growth supports development. The debate, on the other hand, is of whether or not developing countries gain any from this particular system, but it isn't true that these countries gain nothing at all. Since developing countries are higher on the priority list, they are allowed more time to apply the high number of provisions of the World Trade Order agreements. Those that are less developed receive special treatment, which means that they don't necessarily have to follow certain provisions (WTO p.1). But there is still a deficiency that exists; otherwise those provisions in place that are required to be followed would be working. Perhaps the provisions need to be reviewed in order to give these countries a boost in the right direction and cause a snowball effect that... This report stresses that there is no doubt that developing countries are on the agendas of the WTO and the International Institute for Sustainable Development. One of the priorities on these agendas is the information and communication technology sector. Developing countries that would be able to achieve success in the information and communication technology sector would be able to achieve communication internationally with other businesses and with consumers to increase income potential. Such communications are necessary for international trade and the import and export of goods. Business operations would no longer be limited to the home nation alone, but would open the entire world to what that nation has to offer. This paper makes a conclusion that there is a technological and financial deficiency when it comes to the advancement of developing countries being behind the rest of the world. Developing countries do have, on the other hand, some processes that are in place, otherwise they wouldn’t be developing. One could honestly say that if these countries did not have some sort of successful processes happening, they would be considered undeveloped and consist of much higher poverty levels than what they currently have. Globalization has opened a world of opportunities for developing countries, but it has also opened a world of opportunities for the developing countries to be taken advantage of.