Question

A resident buys shares listed on a foreign stock exchange. In the Capital Account, this purchase of assets leads to:

Options

• A debit entry, because foreign exchange goes out

• A credit entry, because foreign exchange comes in

• A credit entry, because assets are acquired

• No entry, because shares are not part of the Capital Account

Answer 1

Purchases of assets are Debits because foreign exchange goes out of the country. Buying foreign shares is therefore a capital outflow recorded as Debit (−) under the recording rule.