Antonomus items IN BOP WHY are called as above line items of bop while accommodating items in bop are below lines items of bop.... Give detailed differences in between.....
Dear Student
When balance of payment of a country is balance then it is called on the line, accommodating transaction are those transaction which are done for making balance of payment balance,generally these transaction are done for meet out current account deficiency(negative balance of payment) by capital account transactions .
Autonomous transactions are those transaction which are done for earning profit so they create surplus balance of payment so it is called above the line transactions. Autonomous items of BOP are independent of the status of BOP of the country. These items are recorded prior to the accommodating items and hence, are referred as 'above the line items' of BOP.
On the other hand, accommodating items are a consequence of autonomous items and are undertaken to rectify the disequilibrium of autonomous items. Hence they are recorded after the BOP surplus or deficit is calculated with the help of autonomous items. Hence, they are also called 'below the line items' of BOP.
Following are some differences between autonomous and accommodating transactions:
Regards
When balance of payment of a country is balance then it is called on the line, accommodating transaction are those transaction which are done for making balance of payment balance,generally these transaction are done for meet out current account deficiency(negative balance of payment) by capital account transactions .
Autonomous transactions are those transaction which are done for earning profit so they create surplus balance of payment so it is called above the line transactions. Autonomous items of BOP are independent of the status of BOP of the country. These items are recorded prior to the accommodating items and hence, are referred as 'above the line items' of BOP.
On the other hand, accommodating items are a consequence of autonomous items and are undertaken to rectify the disequilibrium of autonomous items. Hence they are recorded after the BOP surplus or deficit is calculated with the help of autonomous items. Hence, they are also called 'below the line items' of BOP.
Following are some differences between autonomous and accommodating transactions:
| Autonomous transactions | Accommodating transactions |
| These are the international transactions which are undertaken for economic motive, i.e profit. | These are the international transactions which are not undertaken for economic motive. for example- government financing. |
| These transactions are called Above the line items in BOP. | These transactions are called Below the line items in BOP. |
| The balance of these transactions govern the overall BOP balance. | These transactions are compensating in nature. These transactions correct the disequilibrium in autonomous items. |
| If autonomous receipts are less than payments then it show deficit balance in BOP and vice versa. | If there is deficit balance in BOP, then government run down its reserve in form of accommodating transaction to cover deficit in autonomous transaction. |
Regards