Foreign investment and long term securities in the balance of payment accounts are recorded as

Step 1: Analyze the question The question asks which part of the Balance of Payments (BOP) records foreign investment and long-term securities.

Step 2: Explain the concept The Balance of Payments has two main parts:

• Current account: records trade in goods (visible trade), trade in services (invisible trade), income (interest, dividends, profits) and current transfers (remittances, gifts).
• Capital account (often called the capital and financial account): records capital movements, such as foreign direct investment, portfolio investment (shares and bonds), long-term securities, loans and borrowings, and changes in reserves.

The balance of trade is only part of the current account. It covers just the difference between visible exports and visible imports. Invisible balance is also part of the current account, because it covers services and similar items.

Step 3: Apply it to the question

• Foreign investment is a movement of capital across borders, so it belongs in the capital account.
• Long-term securities (bonds, shares and similar assets held across borders) are also capital movements, so they belong in the capital account too.

Checking the options:

• A. Current account covers trade, services, income and transfers. This is wrong.
• B. Capital account covers investments and long-term capital flows. This is correct.
• C. Balance of trade covers only visible goods. This is wrong.
• D. Invisible balance covers services and similar items. This is wrong.

Step 4: Answer The correct option is B. capital account transaction.

Exam tip: Remember "Current = Day-to-day" (goods, services, income, transfers) and "Capital = Investments and Loans" (money moved to build or hold assets). If you see words like investment, securities, loans or borrowing, think capital account.