The simplest way to think about national income is to consider what happens when one product is manufactured and sold. Typically, goods are produced in a number of 'stages', where raw materials are converted by firms at one stage, then sold to firms at the next stage. Value is added at each, intermediate, stage, and, at the final stage, the product is given a retail selling price. The retail price reflects the value added in terms of all the resources used in all the previous stages of production.
In accounting terms, only the value of final output is recorded.
To avoid the problem
of double counting, only the value of the final stage, the retail price, is included,
and not the value added in all the intermediate stages - the costs of production, plus profits.
In short, national income is the value of all the final output of goods and services
produced in one year.