Balance of Payments Accounts (a) Provide the deÖnition of Balance of Payments Accounts (b) Which transactions...

Balance of Payments Accounts (a) Provide the deÖnition of Balance of Payments Accounts (b) Which transactions are recorded in the Current Account and which transactions in the Financial Account? Provide Examples

Expert Solution

Answer

Part a

Balance of payment refers to all the current, financial, and capital transactions occurred between residents and entities of a home country with the rest of the world for a specific period of time.

For example, in the current account of balance of payment, all the exports of services and goods against which home country receives the payment gets credited in the BOP (Balance of payment) whereas, all the imports of the same against which entities make the payment gets debited in BOP.

Part b

Transactions recorded in current account:

Current account includes the direct payments, net income, and balance of trade. Therefore, it includes all the transactions of goods and services, all the transfer payments such as aid and money transfer as gift. Income transfer of domestic resident working in foreign country.

Transactions recorded in Financial account:

Financial account includes transactions related to assets such as gold, shares, bonds etc. Residents of home country invest in foreign financial assets and make sale and purchase of financial assets. When foreign assets gets sold, domestic receive the money which gets credited in Financial account while the payment given in order to purchase the foreign financial assets gets debited in the same.

Rahul Sunny answered 2 years ago

The balance of payments consists of three accounts which together record the flow of money into...

The balance of payments consists of three accounts which together record the flow of money into and out of a country. The current account records the sale and purchase of goods and services, the capital account records the sale and purchase of financial assets, and the official settlements (OS) account records changes in government holding of foreign currencies. Anything that brings domestic currency into the country is recorded as a positive while anything that sends domestic currency out of the...

Question 10. Provide the balance of payments definition and explain what means the balance of payments...

Question 10. Provide the balance of payments definition and explain what means the balance of payments equilibrium. Moreover, answer the following questions: (BOP=CA+KA+FA+SD+RES) (a)What is the relationship between balance of payments and the supply of domestic currency? (b)What problems may arise as a result of a long term balance of payments deficit and a balance of payments surplus? (c) What is the role of sterilization policy in offseting the balance of payments inequilibrium?

What information is included in the balance-of-payments accounts of a nation? Why are these accounts important?...

What information is included in the balance-of-payments accounts of a nation? Why are these accounts important? Will the balance-of-payments accounts of a country always be in balance? Will the balance of trade always be in balance?

What is meant by the balance of payments? b. In what way is the balance of...

What is meant by the balance of payments? b. In what way is the balance of payments a summary statement? c. What is meant by an international transaction? d. In what way is the time element involved in measuring a nation’s balance of payments? e. What international transactions are included in the current account? f. What does the capital account include?

Briefly explain the Balance of Payments national accounts system. What are the Capital and Current accounts?...

Briefly explain the Balance of Payments national accounts system. What are the Capital and Current accounts? Why is this important information for countries to track?

1) Which of the following accounts usually has a debit balance? a. Freight-In b. Allowance for...

1) Which of the following accounts usually has a debit balance? a. Freight-In b. Allowance for Doubtful Accounts c. Sales tax Payable d. Purchase Discounts 2) If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as a. FOB destination b. FOB n/30 c. FOB seller d. FOB shipping point 3) Merchandise with an invoice price of $5,000 is purchased on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs...

Journalize these transactions, post the transactions to the ledger accounts, prepare a trial balance. Assets 111...

Journalize these transactions, post the transactions to the ledger accounts, prepare a trial balance. Assets 111 Cash 112 Accounts Receivable 114 Prepaid Insurance 121 Land 122 Building 123 Accumulated Depreciation, Building 124 Pool/Slide Facility 125 Accumulated Sepreciation, Pool/Slide Facility 126 Pool Furniture 127 Accumulated Depreciation, Pool Furniture Liabilities 221 Accounts Payable 222 Wages Payable 223 Mortgage Payable Owners Equity 311 L. Judar, Capital 312 L. Judar, Drawing 313 Income Summary Revenue 411 Income from services 412 Concessions Income Expenses 511...

Ritania is calculating its balance of payments for the year. All transactions for the year are...

Ritania is calculating its balance of payments for the year. All transactions for the year are listed below (all amounts are expressed in US dollars). Ritania received weapons worth $200 from the US under its military program; no payment is necessary. A Ritanian firm exported $400 of cloth. A Ritanian resident is paid $10 in interest on a loan to a foreigner. Foreign tourists visited Ruritania and spent $100 in traveler’s checks. Ritanian investors invested $200 overseas and received $50...

Ritania is calculating its balance of payments for theyear. All transactions for the year are...