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2.6. Conceptually, an economic transaction has two sides: something of economic value is provided and something of equal value is received. The double-entry recording system in the balance of payments reflects this. When an economic value is provided (e.g. a shipment of wheat) a credit entry is made, and when an economic value is received (e.g. a payment for the wheat) a debit entry is made. For example, when an exporter sells (provides) goods to a non-resident, the exporter may receive cash (a financial asset) or another type of financial asset (e.g. a trade credit claim) in return. The export is represented by a credit entry and the financial asset acquired is represented by an offset debit entry. An understanding of the double-entry recording system is necessary for a complete understanding of balance of payments statistics.

2.7. Under the double-entry system, by definition credit entries must equal debit entries. Credit entries are required for exports of goods and services, income receivable, and increases in liabilities or reductions in assets. Likewise, debit entries are required for imports of goods and services, income payable, and increases in assets or reductions in liabilities. Where something of economic value is provided without something of economic value in exchange (i.e. without a quid pro quo) the double entry system requires an offset to be imputed (a transfer entry) of equivalent value. For example, food exported as aid requires a credit entry for the goods provided and a debit transfer as the aid offset. The examples in table 2.2 illustrate how the double entry system is applied. Table 2.3 sets out the rules for the system.

	2.2 EXAMPLES OF DOUBLE ENTRY RECORDING
				Credit	Debit
	1	Sale of goods (value 100) to non-residents for foreign exchange (i.e. goods provided and bank payment (a bank deposit) received)
			Goods	100
			Bank deposits, foreign currency assets		100
	2	Purchase of goods (value 120) from a non-resident using trade credit (i.e.goods received and a claim by a non-resident on a resident (trade credit liability) provided)
			Goods		120
			Trade credit liabilities	120
	3	Food aid (value 5) provided to non-residents (i.e.goods provided and transfer imputed)
			Goods	5
			Current transfers		5
	4	Repayment of a loan (value 25) by a resident company to a non-resident (i.e. liability to a non-resident returned reduced and a reduction in bank deposits)
			Loan repayment		25
			Bank deposits, foreign currency assets	25

	2.3 RULES FOR THE DOUBLE ENTRY SYSTEM
	Credit entries, all economic resources provided by the compiling economy, including:		Debit entries, all economic resources received by the compiling economy, including:
	Exports of goods and services.		Imports of goods and services.
	Income accruing to residents from non-residents.		Income accruing to non-residents from residents.
	Claims on residents provided to non-residents; and resident claims on the rest of the world returned to the rest of the world.		Claims on residents returned from the rest of the world; and claims on the rest of the world provided to residents.
	Transfers, which are offsets to debit entries.		Transfers, which are offsets to credit entries.

2.8. The sign convention used in presenting balance of payments statistics is to give no sign (an implied positive sign) to credit entries and a minus sign to debit entries. Similarly, balances or items which are net credits have no sign, while balances or items which are net debits have a negative sign. This is illustrated in box 2.4.

	2.4 SIGN CONVENTION USED IN BALANCE OF PAYMENTS AND INTERNATIONAL INVESTMENT POSITION PRESENTATION
	A positive value (indicated by no sign) is used for credit entries and a negative sign is used for debit entries. This sign convention applies not only to gross entries but also to net entries and to balances. When balances are net credits they are shown as positive (no sign) entries, and when they are net debits they are shown as negative entries. In the following example for services, the gross credit entry has no sign and the gross debit entry a negative sign. Further, the net services balance is positive (without sign) in Year 1 (credit value exceeds the debit value) and negative in Year 2 (debit value exceeds the credit value).
				Year 1	Year 2
		Net services (balance)		2	- 4
			Credit	100	102
			Debit	- 98	- 106
	The following example for financial transactions involves Australian companies extending long term trade credit abroad by 2 (the net of new credit less repayments of existing credit) and receiving additional trade credit of 3.
				Assets	Liabilities
		Long term trade credit (net)		- 2	3
			Drawings	- 25	29
			Repayments	23	- 26
	In this example, there is new lending by Australian businesses to non-residents of 25 and net lending of 2 abroad (drawings less repayments by non-residents). As both represent increases in assets (residents are provided with a claim on non-residents), items are shown with a negative sign; as repayments reduce assets these are shown without sign. The reverse treatment is adopted for liabilities, i.e. increases in gross and net liabilities (non-residents are provided with a claim on residents) are shown without sign and reductions in liabilities are shown with a negative sign.