Read the following statements, Assertion (A) and Reason (R):
Assertion (A): Sale of second-hand machinery to a buyer abroad is a credit item in the current account.
Reason (R): Machinery is a good, and its sale abroad brings foreign currency into the country.
From the given alternatives, choose the correct one:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
Assertion (A): Sale of second-hand machinery to a buyer abroad is a credit item in the current account. — True. Selling a good abroad is an export of goods. Exports of goods are recorded as a credit in the trade balance, which is part of the current account.
Reason (R): Machinery is a good, and its sale abroad brings foreign currency into the country. — True. Old or new, machinery is a good. The foreign buyer pays in foreign currency.
Why R explains A?
A says the sale is a current account credit. R gives the reason: the machinery is a good, so its sale is an export of goods, and it brings foreign currency in. An inflow from trade in goods is a credit in the current account.
NCERT (2026-27): “6.1.1 Current Account Current Account is the record of trade in goods and services and transfer payments. Figure 6.1 illustrates the components of Current Account. Trade in goods includes exports and imports of goods. …” “Balance on Current Account … Balance of Trade (BOT) is the difference between the value of exports and value of imports of goods of a country in a given period of time. Export of goods is entered as a credit item in BOT, whereas import of goods is entered as a debit item in BOT. …” |