Section11_StudyGuide - AEM 230 Section 11 Additional Notes...

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AEM 230 Section 11 – Additional Notes November 19, 2007 I. DEFINITIONS II. DOUBLE ENTRY BOOKKEEPING APPROACH TO BOP EXAMPLE 4 (FROM SECTION NOTES) CREDIT (+) DEBIT (-) 4 US investor receives $30,000 dividend on her shares of a Chinese company. Dividend is paid by a check on a Chinese bank account. Current Account: Trade in Services (Export) Capital/Financial Account: Short Term Capital (+)$30,000 (-)$30,000 The U.S. has exported a capital service to China. . The dividend is the remuneration the U.S. receives for providing such capital service. As it is the case with the export of any service, the export of capital services enters the BOP as a CREDIT in the TRADE IN SERVICES sub- account of the CURRENT ACCOUNT. On the other side, when the Chinese give the U.S. investor a check on a Chinese bank account, we see that the short-term financial assets of the U.S. investor have gone up. Therefore, we have a DEBIT in the SHORT-TERM CAPITAL sub-account of the CAPITAL ACCOUNT. The export of a capital service (dividend; interest on loan) can be thought of in a similar way to
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This test prep was uploaded on 02/19/2009 for the course AEM 2300 taught by Professor Lee,d.r. during the Fall '06 term at Cornell University (Engineering School).

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Section11_StudyGuide - AEM 230 Section 11 Additional Notes...

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