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					Identification of Credit and Debit Transactions in BOP Accounts

 Current Account                 Credit (+)                   Debit (-)
 Goods & Services                exports                      Imports
 Investment income               Received from abroad         Paid to foreigners
 (interest, dividends, etc.)
 Unilateral transfers            Received from abroad         Paid to foreigners
 (foreign aid, pension, etc.)


 Financial Account              Credit (+)                    Debit (-)
 U.S. assets abroad             U.S. sells or decreases       U.S. purchases or
 (cash, bank deposits,          its assets abroad             increases assets abroad
 stocks, bonds, factories,      (consider as export of        (consider as import of
 businesses, etc.)              assets)                       assets)
 Foreigners’ assets in U.S.     Foreigners buy or             Foreigners sell or
 (cash, bank deposits,          increase assets in U.S.       decrease their assets
 stocks, bonds, factories,      (consider as export of        held in U.S. (consider as
 businesses, etc.)              assets)                       import of assets)


 Capital Account                             Credit (+)               Debit (-)
 Debt forgiveness                                                     outflow of
 (enters as debit in capital account and                              capital from
 as credit in financial account as claim                              U.S.
 on indebted country decreases)
 Non-produced or non-financial capital       inflow or                Outflow or
 (e.g. migrants bring title to personal      acquisition of           disposal of
 assets with them, transfer of title to      capital                  capital
 real estate, embassy, military bases,
 etc.) or intangible assets (e.g.
 trademarks and copyrights)

Some examples
1. An American citizen purchases a phone answering machine from Korea. This is a
   current account debit for U.S. The American citizen pays for the machine by writing a
   check. If the Korean seller deposits the check in its account in an American bank, it
   enters as a credit in U.S. financial account. Instead, suppose the American pays with
   cash (dollar bills), not check. The Korean company deposits the cash in its bank
   account in New York; then too it becomes a credit in U.S. financial account. If the
   Korean company, instead of depositing the cash in an American bank, deposits the
   cash in a Korean bank, in which account it ends up being credited depends on how
   this money is used. Suppose, the Korean bank lends this money to a Korean importer
   to import goods from U.S., it then enters as U.S. current account credit. On the other
   hand, if the Korean importer imports a financial asset from U.S., it enters as a
   financial account credit.
2. If a Canadian citizen buys shares in the Mexican stock market (debit in Canadian
   financial account) and pays for her shares by writing a check drawn on her Canadian
   bank (credit in Canadian financial account). Instead, if she pays for her shares by
   writing a check drawn on a Mexican bank, then it does not enter the financial account
   since it is a change of one foreign asset for another in the same country.
3. In the above example, if the Canadian citizen pays for her newly acquired Mexican
   shares by writing a check drawn on her account in a German bank, it enters as a credit
   in Canadian financial account because the Canadian claims on German assets
   decrease.

				
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