Can you give some examples of current and capital account - ProProfs Discuss
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Can you give some examples of current and capital account transactions?

Asked by Caleb, Last updated: Oct 20, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

The Canada and canadians referred to is the collective canada. in other words, its everyone in the country including the government. Here are a few examples of how transactions might be recorded: 1. You buy a jacket from a french company and pay with a cheque in the amount of $1,000. Your payment to purchase a foreign product enters the canadian current Account as an outflow of funds. At the same time, the cheque is deposited in a canadian bank. As a result of this deposit the foreign company has purchased, and the canadian bank has sold, a canadian asset (a bank deposit worth $1,000). This transactions shows up as a cash inflow in the canadian capital account. 2. You are traveling in france and you spend $200 for a one-night stay in a hotel, and you use your visa card. your tourist expenditure would be counted as a service import for canada and would result in an outflow in the canadian current account. the Restaurant is entitled to receive $200 from the credit card company and represents a claim on a future payment. By paying for your meal, you have sold an asset to france and generated a cash inflow of $200 in the canadian capital account. So for each transaction there are two entries. as we purchase more goods than we sell, an imbalance appears in the current account (current account deficit). Since these current account transactions were paid for in some way, we know the negative balance in the current account must be offset by a positive balance in the capital account. In other words, as the current account imbalance arises, so too must an opposite imbalance arise in the capital account. This is a simplified example and extends beyond the scope of this course. for more information i would suggest you examine an international economics text available at your local library so you can read further on the balance of payments between countries.

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