In a given year, Gondolpha had total imports of 976 and total exports of 734. It also made direct foreign investments of 297. There were no other transactions on the BOP account. The Official Reserves account:
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A. B. C. D.C
Remember the 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.
Therefore, the credits on the combined current and capital account equal 734 and the debits equal 976 + 297 = 1,273.
Since debits must equal credits at the end of the accounting period, there must be a credit entry in the amount of (1,273 - 734) = 539 in the Official Reserves account, since the sum of the changes in the current, capital and official reserves accounts equals zero over an accounting period. Thus, the Official Reserves account decreases by 539.
If you do not like the above rule-based treatment of the problem, try the intuition: The total net outflow of cash from the current and capital accounts of Gondolpha equals 976 + 297 - 734 = 539. This amount has to come from somewhere. That "somewhere" is represented by the Official Reserves Account, which loses 539 in order to satisfy the liabilities of the current and capital accounts.
Caution: One of the bizarre quirks in international accounting is that decreases in Official Reserves Account are represented by a "+."