Reliance ltd. purchased a construction company in Saudi Arabia, where will this entry be recorded in the balance of payment account?

It will be recorded on the debit side of capital account

The correct answer is option 1:It will be recorded on the debit side of capital account

• The Balance of Payments (BoP) consists of the Current Account (which records trade in goods and services) and the Capital Account and Financial Account (which records investments and financial transactions).
• When Reliance Ltd. purchases a construction company in Saudi Arabia, it is considered a foreign direct investment (FDI) outflow from India because Indian money is being sent abroad to acquire assets.
• Outflows of money from the country are recorded on the debit side of the Capital Account in the Balance of Payments.