Question

capital account-current account financial account

The Balance-of-Payments (BOP) Explained Intemational trade invalves the sale other countries (imports) goods and services to residents in other countries (exports) and the purchasse of goods and services from residents Country's balance-of- payments accounts keep track of the payments to, and receipts from, other countries for a particular time period. These include payments to forelgners for imports of goods and services, and receipts from foreigners t to other countries is entered in the balance-of-payments accounts s a debit and given a negative (-) sign. Any transaction resulting in receipt from ather countries is entered as a credit and given a positive (+1 sign Balance-of-paye us are divided into the curent accdunt, the capial a and the oclal reserves account. Thle ue unt records transactions that pertain to alltee alegones: 1) goods nts and payments made to foreigners investing in a country. A current account deficit is a situation when a country imports more goods, services, and income than it exports. The opposite situation is called a current account surplus. Persistent deficits mean that one should look at the rest of the balance-of-payments accounts like the capital account and the financlal account and details of double-entry bookkeeping. Read the sample transactions listed and roll over each transaction to read the description. Identify the correct balance-of-payments account for each of the transactions. Japanese Autos Chinese Government Honduran Worker French Company U.K. Bonds Italian Contractor Capital Account Current Account Financial Account

-japanese auto

-chinese government

-honduran worker

-french company

-u.k bonds

-italian contrator

Answer 1

Answer to the question:

Japanese Auto - Current account. There is inflow of Japanese goods i.e. automobiles in USA and this account covers all the payments and receipts made in respect of manufactured goods.

Chinese Government - Financial Account. It keeps the track of flow of funds from and to the country of China through investments made in various sectors.

Honduran Worker - Capital Account. Honduran Worker is a migrant in USA and capital account includes flow of taxes, dealings in assets, etc. by a migrant.

French Company - Financial Account. French company has invested in USA and any flow of funds in and out of USA by this company will be included in the financial account.

UK Bonds - Financial Account. Bonds are nothing but investment and an investment is part of financial account.

Italian Contractor - Capital Account. Italian contractor is a migrant in USA and capital account includes flow of taxes, dealings in assets, etc. by a migrant.