The following precautions are to be taken while using expenditure method:
(i) Only final expenditure is to be taken into account to avoid error of double counting.
(ii) Expenditure on second hand goods is not to be included.
(iii) Expenditure on shares and bonds is not to be included.
(iv) Expenditure on transfer payments (called transfer expenditure) is not to be included.
(v) Expenditure on self-use of own produced goods (like the farmer using his production of wheat or the house owner using his own house) should be included.