Arrange the following steps of estimation of National Income by income method in the proper sequence.

(A) Identification and classification of producing firms.

(B) Estimation of NDPFC

(C) Estimation of NNPFC.

(D) Classification of factor Income

Choose the correct answer from the options given below:

The correct option is (A), (D), (B), (C).

To estimate National Income using the Income Method, a systematic and logical sequence of steps must be followed. The step-by-step breakdown of this estimation process is explained below:

1. Identification and Classification of Producing Firms (A):
The first step is to identify all the producing enterprises or firms within the domestic territory of the country. These enterprises are classified into three main sectors: primary, secondary, and tertiary sectors.

2. Classification of Factor Income (D):
Once the producing enterprises are identified, the next step is to classify the factor incomes paid by these enterprises to the owners of the factors of production. Factor incomes are generally classified into:
• Compensation of employees
• Operating surplus (rent, royalty, interest, and profit)
• Mixed income of self-employed

3. Estimation of Net Domestic Product at Factor Cost - NDP_FC (B):
After classifying and calculating the factor incomes generated within the domestic territory of the country, they are added together to estimate the Net Domestic Product at Factor Cost (NDP_FC), which is also known as domestic income.
$${\text{NDP}}_{\text{FC}}=\text{Compensation of Employees}+\text{Operating Surplus}+\text{Mixed Income}$$

4. Estimation of Net National Product at Factor Cost - NNP_FC (C):
The final step is to estimate the National Income, which is Net National Product at Factor Cost (NNP_FC). This is achieved by adding Net Factor Income from Abroad (NFIA) to the domestic income (NDP_FC) calculated in the previous step.
$${\text{NNP}}_{\text{FC}}={\text{NDP}}_{\text{FC}}+\text{Net Factor Income from Abroad (NFIA)}$$

Therefore, the correct chronological sequence of steps is (A) → (D) → (B) → (C).