Mention any four precautions that should …

Precautions (Item to be included/excluded). While calculating national income by value added method, value of following items should be included:
(i)    Imputed rent of owner occupied houses because all houses have rental value irrespective of its use by self or tenant.
(ii)    Imputed value of goods and services produced for self-consumption or for free distribution;
(iii)    Value of own-account production of fixed assets by enterprises, government and the households;
(iv)    Only value added and not value of output by production units should be included;
(v)    Do not include sale of second-hand goods as they are not fresh production activity. However, brokerage or commission paid to facilitate sale is included because it is a fresh production activity.
Since national income measures and reflects the current achievements of an economy during a year, value of following items should be excluded from its purview.
(i)    Sales and purchases of second-hand goods. They are not a part of production of the current year. Moreover, their value had already been included in national income of the year in which they were produced. However, if the transaction has been made through a broker, his commission or brokerage should be included because he has rendered productive service. Again services for self-consumption like those of housewives are not included as it is difficult to estimate their market value.
(ii)    Sale of bonds by a company. This is merely a financial transaction which does not contribute directly to the flow of goods and services. Again services for self consumption like those of house wife are not included as it is difficult to estimate their market value.
(iii)    Income of a smuggler. It is an illegal activity and all illegal activities (like smuggling, gambling, black marketing, etc.) are excluded from national income.