State on Which Side of Capital Account/Current Account Will the Following Transactions Be Recorded and Why: (I) Interest on Loan Received from Nepal (Ii) Import of Mobile Phones from China - Economics

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Short Note

State on which side of capital account/current account will the following transactions be recorded and why:
(i) Interest on loan received from Nepal
(ii) Import of mobile phones from China

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Solution

(i) Interest on loan received from Nepal:
It is recorded as a positive item in the Capital Account of the BOP, as it results in an inflow of the foreign exchange into a country.

(ii) Import of mobile phones from China:
It is recorded as negative items in the Current Account of the BOP, as it results in an outflow of the foreign exchange from the country.

Concept: Balance of Payments - Capital Account
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