CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

Stock dividends from foreign investment should be recorded as a ______ on the ______ account while interest payments from foreign government bonds should be recorded as a ______ on the ______ account.
Correct Answer: They should both be recorded as credit on the current account.

User Contributed Comments 9

User Comment
SKIA Why are these on the current account? The reading states, "the financial account documents all international monetary flows related to investment in financial assets such as bonds and stocks."
Shaan23 Interest and dividend payments are current account

No idea how somebody can ask this question after doing the first 9 question.
schweitzdm I fell for the same trick, SKIA.

My first attempt was:

Credit on financial (assumed an inflow from a stock)
Debit on financial (assumed outflow from a bond)

Now I realize that if you are receiving an interest payment from a bond, it would be an inflow.

Furthermore, it seems that these are on the current account because they are not the initial principal payment going towards a stock or a bond.
schweitzdm Happy to say that on my 2nd exposure to this question I got it right. Woohoo.
ankurwa10 Shaan23; don't know whether yours comments helps "lesser lights" like me because it clearly does not help in where i went wrong.

Had to cross check the schweser reading; where it mentions that income of debt securities and income receipts are reflected in the current account.
xp_acctant Tricky question, fell for "WHILE" , thinking obviously there is a difference.
babycdq They are all income from investment. should be recorded in current account.
khalifa92 the U.S GAAP treatment for interest and dividends *received* is operational.
Freddie33 Shaan don't be a d1ck
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