Shruti has done her graduation in economics from Delhi University. Now, she is planning to pursue her studies from London School of Economics and will be leaving India soon. All the expenditure incurred by Shruti on her studies in London will be recorded on which side of the BoP account?
Answer & explanation
Correct answer: option 3
The correct answer is Option 3: It will be recorded on the debit side
Whether a transaction is recorded on the debit side or credit side is determined on the basis of flow of foreign exchange. If due to any transaction, there is inflow of foreign exchange the transaction will be recorded on the credit side whereas, when there is outflow of the foreign exchange it will be recorded on the debit side.
Here, Shruti is moving to London, and all her expenses will lead to outflow of foreign exchange, thus it will be recorded on the debit side of the account.