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Classify the transaction reported accounts financial, capital and current US company hires an UK consultancy firm...

Classify the transaction reported accounts financial, capital and current

  • US company hires an UK consultancy firm to solve some issues.
  • U.S. firm acquires shares of an UK tele company.
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Answer #1

1. This is a CAPITAL account transaction as United State company is hiring consultancy firm which is capital expenditure in nature.

2. This is a FINANCIAL account transaction as acquiring of share will increase the ownership of United State company.

3.Acquiring of computer is CURRENT account transaction as it is related to two current expenditure.

4.purchasing of an insurance is related to CAPITAL account expenditure and it is recorded in CAPITAL account.

5. Purchasing of United Kingdom treasury bonds will lead to increase in international asset and hence it is a financial transaction and to be recorded in FINANCIAL account.

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