Question

if an italian firm buys computers from a canadian firm and the canadian firm uses the dollar it gets to buy italian treasury bonds, what items are recorded in the canadian balance of payments accounts?

Answer 1

The items are recorded in the Canadian balance of payments accounts credit the trade account; debit the capital and financial account.

What is balance of payments?

The balance of payments (BOP), also known as the international balance of  payments, is a report of all transactions  between  one country and the rest of the world over a period of time, such as a quarter or a year. It contains a summary of all transactions that private individuals, companies and administrative bodies of the country have made with private individuals, companies and administrative bodies outside the country.

Balance of payments  transactions consist of imports and exports of goods, services and capital, as well as transfers such as foreign aid and remittances. The country's balance of payments and international net assets together form the external account.

The bill of payments divides transactions into two accounts: a current account and a capital account.

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