From the following transactions which transaction will be recorded in the current account of the balance of payments :
Answer & explanation
Correct answer: option 2
The correct answer is option (2) : Indian buys French made car from France
The current account records the flow of goods and services between countries. Buying a French-made car from France is an import of goods, which is a component of the current account.
Indian buys French car company : This transaction involves the acquisition of a company, which falls under the capital account, not the current account.
Indian buys French-made car from France : This is a transaction involving the purchase of a good ( a car) from another country, and it is recorded in the current account.
Sale of shares of an Indian company to French customers : This involves the sale of financial assets (shares) and is recorded in the capital or financial account, not the current account.
Purchase of shares of a French company by Indian customers : Similar to the third transaction, this involves the acquisition of financial assets and is recorded in the capital or financial account.