When a domestic resident purchases a foreign stock directly on the foreign stock exchange, the transaction is entered as a ________ in the BOP account.
Click on the arrows to vote for the correct answer
A. B. C. D.D
In BOP accounting, by convention:
1. Any inflow of domestic currency represents a credit and any outflow of domestic currency represents a debit on the BOP account.
2. Any inflow of foreign currency represents a debit and any outflow of foreign currency represents a credit on the BOP account.
Thence, direct purchase of a foreign stock, which represent an outflow of domestic currency, is treated as a debit in the BOP account.