Question

Where will the sale of machinery to abroad be recorded in the Balance of Payments Accounts? Give reasons.

Answer 1

Basically, the balance of payments on a current account is a statement of actual receipts and payments in a short period. It includes the value of imports and exports of both goods and services. Here, the sale of machinery to a foreign country is an export of goods which leads to an inward flow of foreign exchange. Hence, it is treated as a positive item in the current account of the balance of payments.