Question

What is the problem of double counting and explain with the help of example for 3 marks?

Answer 1

Double counting in accounting is an error whereby a transaction is counted more than once. For example, the costs of intermediate goods used by a business to produce a finished good are included in the computation of a nation’s gross domestic product. Since the final price of a good already includes the value of all the intermediate goods used to produce it, including the price of intermediate goods when calculating gross domestic product would involve double counting. Double counting seriously overstates gross domestic product.