1. Indicate how each of the following international transactions is entered into the U.S. balance of payments
with double-entry bookkeeping:
(a) A U.S. resident imports $500 worth of merchandise from a U.K. resident and agrees to pay in three
months.
(b) After the three months, the U.S. resident pays for his imports by drawing down his bank balances in
London.
(c)What is the net effect of transactions (a) and (b) on the U.S. balance of payments if they occur during the
same year?
Answer:
a) U.S. debits its current account by $500 and credits the capital by the same amount.
b) U.S. credits capital by $500 and debit the capital by an equal amount.
c) U.S. is left with $500 debit in the current account and net credit balance of $500 in the capital account.
2. Indicate how each of the following international transactions is entered into the U.S. balance of
payments with double-entry bookkeeping:
(a)The U.S. government gives a $100 cash balance in a U.S. bank to a developing nation as part of the
U.S. foreign aid program.
(b)The developing nation uses the $100 bank balance to import $100 worth of food from the United
States.
(c)What is the net effect of transactions (a) and (b) on the U.S. balance of payments if they occur during
the same year?
Answer:
a) U.S. debits unilateral transfers by $100 and credit the capital by the same amount.
b) U.S. credits the current account by $100 and debit the capital by the same amount.
c) Debit of $100 in unilateral transfers and credit $100 in current account.
with double-entry bookkeeping:
(a) A U.S. resident imports $500 worth of merchandise from a U.K. resident and agrees to pay in three
months.
(b) After the three months, the U.S. resident pays for his imports by drawing down his bank balances in
London.
(c)What is the net effect of transactions (a) and (b) on the U.S. balance of payments if they occur during the
same year?
Answer:
a) U.S. debits its current account by $500 and credits the capital by the same amount.
b) U.S. credits capital by $500 and debit the capital by an equal amount.
c) U.S. is left with $500 debit in the current account and net credit balance of $500 in the capital account.
2. Indicate how each of the following international transactions is entered into the U.S. balance of
payments with double-entry bookkeeping:
(a)The U.S. government gives a $100 cash balance in a U.S. bank to a developing nation as part of the
U.S. foreign aid program.
(b)The developing nation uses the $100 bank balance to import $100 worth of food from the United
States.
(c)What is the net effect of transactions (a) and (b) on the U.S. balance of payments if they occur during
the same year?
Answer:
a) U.S. debits unilateral transfers by $100 and credit the capital by the same amount.
b) U.S. credits the current account by $100 and debit the capital by the same amount.
c) Debit of $100 in unilateral transfers and credit $100 in current account.
