Question
Download Solution PDFWhich of the following should not be included in the balance of payments account?
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is Bonus shares to equity shareholders.
Important Points
- Bonus shares to equity shareholders are not included in the balance of payments account. The balance of payments (BoP) is a record of all economic transactions between residents of a country and the rest of the world over a specific period. It is divided into three main components: the current account, the capital account, and the financial account.
- Bonus shares are essentially additional shares given to existing shareholders without any cash payment.
- When bonus shares are issued, the company's capital structure changes, but there is no direct inflow or outflow of foreign exchange or funds between the country and the rest of the world.
- Since bonus shares do not involve any foreign exchange transactions or movement of funds across borders, they are not recorded in the balance of payments.
Additional Information The balance of payments focuses on transactions that involve the exchange of goods, services, and financial assets between residents of different countries. While bonus shares may have implications for a company's financial position and its shareholders, they do not impact the international balance of payments since they do not involve cross-border transactions.
Last updated on Jun 6, 2025
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