Krishana ltd. is a company that deals with the import and export of machinery. They took a bulk order of Rs 280 crore to be delivered to Paris within 3 months. According to you, on which side of the BoP account shall the transaction be recorded?

Credit side of current account

The correct answer is Option 4: Credit side of current account

Here's why:

The Balance of Payments (BoP) account is a record of a country's economic transactions with the rest of the world. It's divided into two main accounts: current account and capital account.

Current account: This account records the flow of goods, services, income, and current transfers between residents of a country and the rest of the world.

Capital account: This account records capital transfers and acquisitions or disposals of financial assets between residents of a country and the rest of the world.

In this scenario:

a. Krishana Ltd. is an Indian company exporting machinery (goods) to Paris.
b. This is a transaction involving the export of goods, which is recorded in the current account.
c. When Krishana Ltd. exports machinery to Paris, it earns revenue from abroad. This revenue constitutes an inflow of funds into the country. In the BoP accounting system, inflows are recorded as credits because they represent increases in the country's financial assets.