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