IGCSE Economics Paper-1: Specimen Questions with Answers 61 - 61 of 64

Question 61

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Question

MCQ▾

The accounts of balance of payment must always balance, because of:

Choices

Choice (4)
a.BOP is a cash flow statement
b.It is based on double entry principle
c.BOP records international transactions
d.Records flow of foreign exchange between countries.

Answer

b.

Explanation

  • BOP is a statement that systematically presents, statistical data for a specific period (a year or quarter), and the economic transactions of an economy with the rest of the world.
  • BOP Account follows a double-entry accounting system i. e. every transaction is presented by a credit and a debit entry, with exact equal values but in opposite sign. It denotes the giving and receiving side of external transaction.

The following table represents the credit and debit side of BOP.

The following table represents the credit and debit side of BOPThe following table represents the credit and debit side of BOP
CreditDebit
Export of goods and servicesimport of goods and services
Income received from abroadIncome payable abroad
Transfers from abroadTransfers to abroad
Increase in external liabilitiesDecrease in external liabilities
Decrease in assetsIncrease in assets

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