Which components are included in gross investment?
Answer and explanation
Correct answer: Net investment and depreciation
The accounting identity is Gross Investment = Net Investment + Depreciation. Gross investment therefore includes the net addition to capital plus the expenditure needed to replace capital consumed during production. Wages and rent are factor payments, while taxes and transfer payments are fiscal items. Consumption and exports may affect the economy but are not the two components in this identity.
Frequently asked questions
What is the correct answer to this question?
Net investment and depreciation
Why is this the correct answer?
The accounting identity is Gross Investment = Net Investment + Depreciation. Gross investment therefore includes the net addition to capital plus the expenditure needed to replace capital consumed during production. Wages and rent are factor payments, while taxes and transfer payments are fiscal items. Consumption and exports may affect the economy but are not the two components in this identity.
Which subject and chapter does this question cover?
This is a Class 11 Accountancy question. Chapter: Depreciation, Provisions, and Reserves.
