Are the following entered (i) on the credit side or the debit side and (ii) in the current account or capital account in the Balance of Payments account?You must give reason for your answer. (a) Investments from abroad. (b)Transfer of funds to relatives abroad.(c )Imports of machinery.

Are the following entered (i) on the credit side or the debit side and

1.	Are the following entered (i) on the credit side or the debit side and (ii) in the current account or capital account in the Balance of Payments account?You must give reason for your answer. (a) Investments from abroad. (b)Transfer of funds to relatives abroad.(c )Imports of machinery.
Answer» Solution :(a) Investments from abroad: It is recorded in capital account because it creates a liability to pay foreign exchange. It is recorded on credit side because it LEADS to inflow of foreign exchange. (b)Transfer of FUNDS to RELATIVES abroad:It is recorded in the current account because it does not change any liability or an asset. It is recorded on debit side because it leads to outflow of foreign exchange. (c ) IMPORTS of machinery: It is recorded as VISIBLE items in the current account because it does not change any liability or an asset. It is recorded on debit side because it leads to outflow of foreign exchange.

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Are the following entered (i) on the credit side or the debit side and (ii) in the current account or capital account in the Balance of Payments account?You must give reason for your answer. (a) Investments from abroad. (b)Transfer of funds to relatives abroad.(c )Imports of machinery.

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