Which of the following account records all the transactions between the residents of the country and the rest of the world causing a change in assets and liabilities of the residents of the country or its government?
Answer & explanation
Correct answer: option 1
The correct answer is option 1: Capital account
Capital account of BOP records all the transactions between the residents of the country and the rest of the world which cause a change in assets and liabilities of the residents of the country or its government.
Here’s a brief overview of each option:
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Capital Account: This records transactions involving changes in the ownership of assets and liabilities between residents and non-residents, including foreign investments, loans, and the purchase/sale of assets. It reflects changes in a country's assets and liabilities.
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Current Account: This records transactions related to the trade of goods and services, income from investments, and unilateral transfers, but does not directly involve changes in assets and liabilities.
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Errors and Omissions Account: This account is used to adjust for discrepancies and is not a primary account for recording transactions affecting assets and liabilities.
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Autonomous and Accommodating Accounts: These terms refer to different types of transactions within the current account or capital account, but they are not specific accounts themselves.