Answer to Question #96573 in Macroeconomics for hanumant

Question

In balance of payments debit means inflow and credit means outflow then why debit which is inflow is symbolized with -negative and credit as +positive please let me know with suitable examples

Answer 1

Balance of payment (BOP) account is a double entry system that has two sides; debit and credit side. Any business transaction that generates foreign exchange is documented on the credit side whereas a transaction that leads to lose of foreign exchange is put down on the debit side. For these reasons, debit (inflow) is symbolized with -negative and credit (outflow) is symbolized with +positive. For example, export is recorded at the credit side because it generates foreign exchange whereas import is recorded at the debit side as it leads to the outflow of currency.