RESERVE ASSETS
Reserve assets are instruments available with government authorities for financing or regulating payment imbalances, it comprises of monetary gold, special drawing rights (SDRs) and foreign exchange. Central bank and treasuries use this instrument in financing the deficit. The reserves are also the balancing figure of the balance of payment account. If sufficient reserves are not available, a country needs to borrow money from institutions like the World Bank and International Monetary Fund (IMF).
AUTONOMOUS AND ACCOMMODATING TRANSACTION
Most of the items of the Current account are items of normal course, i.e, they are not deliberately planned by the government, such as goods and services imported or exported, donations given or taken, these are known as autonomous transaction. These transactions are undertaken mainly from a profit motive. If the balance of payment account does not balance through autonomous transaction capital movement takes place for achieving equilibrium. In accommodating transactions, government may borrow money or attract foreign investment, or lend and invest money in foreign countries such transactions are regarded as accommodating transaction. Thus, accommodating transactions can be regarded as transactions which are deliberately taken to balance the balance of payment account. Thus, we can conclude that the balance of payment account always balances or needs to be balanced, either by autonomous transaction or accommodating transaction
EQUILIBRIUM AND DISEQUILIBRIUM IN BALANCE OF PAYMENT
When the credit is equal to debit in the balance of payment account it is known as equilibrium. Even when all transactions are recorded in the balance of payment account, very often either credit e...
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A country like Pakistan always faced problems of deficit in balance of trade account except for 1972-73’s positive BOT ($ 20 million) was the massive currency devaluation in 1972 when the rupee was devalued from Rs. 4.76 to 2.3 times higher level of Rs. 11 per US dollar. The exports increased significantly and the share of exports in GDP rose to 14.9%. "GeoCities.com" 2009 http://www.oocities.org/znuniverse/Economics_of_Planning/bop.htm
EXCHANGE DEPRECIATION
In this method domestic currency is allowed to float in the world market to find out the exchange rate on the basis of demand and supply. Example, If $1= Rs55 and demand for dollar increases, then people would be ready to pay more Rupees for Dollar & if exchange rate becomes $1=Rs57 than many people would find it expensive to buy from a foreign market, therefore imports will automatically fall.
Since 1992, Canada has increased their amount of exports of goods year-in and year-out until slight downfalls in 2001 and 2002. However, between 1992 and 2000 they raised exports from $135 billion to $289 billion, an increase of 114%. Imports of goods also rose consistently over that nine year period from $128 billion to $244 billion. The key fact there though is that imports rose only 90% compared to a rise in exports of 114%. This has allowed Canada to maintain a very healthy trade balance, which has also risen consistently except for a few decreases in 1997, 1998, and 2002. They have not run a trade balance deficit on goods once since 1992.
The second tool the Federal Reserve uses is the adjustment of the reserve ratio. The reserve ratio is the ratio of the required reserves the commercial bank must keep to the bank’s own outstanding checkable-deposit liabilities (Brue, 2004, p. 254). By raising and lowering the ratio, the Fed can control how much the commercial banks can lend. For example, if the Fed lowers the reserve ratio, commercial banks will now have more excess reserves allowing them to lend more money to businesses or individuals. Vice-versa, by increasing the ratio, the Fed forces the banks to lend less money due to having smaller excess reserves. If the bank is deficient in the amount of reserves it has, the bank is forced to reduce checkable deposits and, subsequently, reduce the money supply. It may also need to increase its reserves by selling bonds, which would also lower the money supply (Brue, 2004, p. 274).
Historically, this is outlined in the domestic societal framework (a rationalist point of view dictating political outcomes as a direct result of domestic material interests in society). Whatever society wants, society gets, leaving the consumer is to benefit from a fixed exchange rate. Competition exists between all interests. Whatever interest dominates takes the winning interest. The winning interest, then, determines the outcome. With businesses facing pressure to decrease domestic prices, consumers now have the upper hand. (Wellhausen, 10-2-14). Thus, due to the enhancing credibility of the government, consumers also are to benefit from a fixed exchange rate. (Multiple governments
As we learned in class by keeping accounting on the simple way of a General ledger the entries goes as follows, every entry is A Debit for 1 account following with a credit on the other for Example when you have a Rent Expenses of $ 15,000 meaning you taking out money from cash account to p...
This pronouncement required the deferral method of accounting for income taxes. When the accounting net income exceeded taxable net income, balancing credit should be recognized, when the taxable net income exceeded the accounting, a balancing debit should be recognized. This was considered a deferred credit and a deferred debit. Deferred charges and credits were default classification and were placed on the Balance Sheet in what was called "no man's land," or some undefined region, between liabilities and owner's equity for deferred credits and between assets and liabilities for deferred charges. Under APB Opinion #11 it was believed that the balancing credits and debits would eventually reverse and cancel out and therefore it was to be treated as a temporary measure.
This is an exchange rate system where the currency exchange rate system is allowed to be determined by the forces of demand and supply. Here, the central bank and the government do intervene to cub extreme exchange rate fluctuation by adopting monetary or fiscal policy.
The stability of currency values plays a significant role for economic and financial stability. It is not difficult to see the exchange rate fluctuations are widely regarded as damaging. As the movements of the exchange rate have significant and large effects on the trade balance, resource allocation, domestic prices, interest rate, national income and other key economic variables. Then can exchange rate movements be predicted by these fundamental economic variables?
There are many techniques used to manage cash including, the nature of asset growth, controlling assets, patterns of financing, the financing decision, a decision process and shifts in asset structure. For any company the growth of asset results in a growth in wealth if managed effectively. The typical firm usually forecast the rate of sales to ensure that the production of goods match sales so there is not an overflow if inventory. As a company expands and produces more items they will acquire permanent current assets. Permanent current assets can be described as a constant inventory of items because it is almost impossible to predict the market and the demands of the consumer.
In 1996, the US current account and emerging market plus developing country current account were each about zero. In 2008, US current account was in deficit by $ 600 bn, the emerging market/developing country current account in surplus by $ 900 bn. (sect. 1.1)
Asset are the resources for running the business work. As a business, if get more assets it means that the business is powerful. Asset also be divided into two categories which is non-current assets and current assets. Non-current assets are long-term use for
The study is primarily designed to find out the continuous issue of the banking system in
The foreign exchange markets allow the conversion of currencies, where it helps the firms to conduct trade more efficiently across the national boundaries. In addition, firms can shop for low cost financing in capital markets all over the world and then use the foreign exchange market to convert the foreign currency that they got into whatever currency they require. With the foreign exchange nowadays, anyone can go to other country by converting their domestic currency into the foreign currency. The foreign exchange will follow the rate of exchange according to the country's rate. But still, the foreign exchange market is actually dealing with fluctuation where sometimes it has upward and downward movement.
The first of these exchange rates, nominal, is the number of units of a given currency that can purchase a unit of a given foreign currency (INSERT CITATION). When using this rate, countries are able to value of their own currency relative to one-another when trading in the foreign exchange market. This principle, however, is not exclusive to trading currencies. Similar to the nominal exchange rate, the real exchange rate uses goods and services in place of currency. As a result, it is defined as the amount of goods or services that can be traded in one country for a good or service in another country. Using this rate, countries are able to gauge the competitiveness of their goods and services in trading with any given country, making it a key factor for countries trading in the global economy.
In classified balance sheet categories of assets are: current assets, investments, fixed assets, intangible assets, etc.
Clearing of bank mechanism include collection and payments of cheque, demand draft, payment regulate and dividend warrant etc. it’s a best service offer by the bank. It helps the customers a lot necessary role of commercial bank is to accept deposit and to honor cheque drawn upon them. Typically cheques are used for the payment making to account holder. Collection and payments of instrument are known as outward and inward clearing. During my training in clearing department Mr. Usman help me to improve my learning.