Hi In the subjected question when calculating the financial account the capital account is netted off. I can't see anywhere in the textbook or the notes where it says to do that. My understanding is the financial account is simply net direct investments, other investments and cash flows and flows to and from the reserves. Would it be because the capital account could be thought of as a bank deposit that would be categorised under "other investments and cash flows"? Many thanks
Hi bhoy_1888 I can't see where the solution does what you say! I think you might have got in a muddle because there are two items of 5,000? You're right about the financial account, so the financial account balance is: -40,500 (net direct investment) + 63,000 (net other investments) - 5,000 (net additions to reserves) =+17,500 The capital balance comes in at the next stage when you add the current balance (-34,800), the capital balance (+5,000) and the financial account (+17,500) together. This comes to -12,300. We know that all four accounts (including net errors and omissions) should come to zero, therefore net errors and omissions must be +12,300. Hope this helps. Margaret
