Question

Explain below transactions under credit and debit of current account or capital account or financial accounts...

Explain below transactions under credit and debit of current account or capital account or financial accounts of two countries

German resident purchases a laptop from German retailer.    

China investor purchases 4% shares of UK company.

UAE company sells bonds to a UK customer.

China tourist purchases a souvenir from a US shop.

UK tourist pays for a tour package with an Indian tour operator.

UAE company buys 100% shares of a US company.

UK company imports mobile phones from a Japanese seller.

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Homework Answers

Answer #1

1. It forms part of national product and doesn't form part of balance of payments because BOP is the balance of international payments

2. Credit side of financial account: UK ( shares are part of portfolio investment, which is a component of financial account

Debit side of financial account : china

3. Credit side of financial account: UAE ( Bonds are also part of portfolio investment. A positive financial account means that foreign buyers are purchasing domestic assets)

Debit side of financial account - UK

4. Credit side of current account: U. S. since goods form part of current account, this is an earning for US

Debit side of current account : China

5. Credit side of current account : India ( services are part of current account) ( India is receiving from UK tourist)

Debit account of current account: UK  

6 credit side of financial account : US

Debit side of financial account: UAE

7 credit account of current account: Japan

Debit account of current account : UK

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