This article is about how Canada’s trade deficit shrinks more than expected in August as exports to the U.S. grow. Therefore, this will put more people at ease because the declines several months ago might have indicated a stop to the recovery of the economy. This decreased the deficit from $2.55 billion Canadian dollars in July to $1.35 billion in August. Since the overall trade trend is weak, the
Bank of Canada will not change the benchmark interest rate. However, it has raised the borrowing costs several times and RBC might tighten their credit in March 2011. The Canadian dollar pared with the U.S. dollar before this report to $1.002. This increase in the Canadian dollar and the damaged U.S. economy might have been a reason to Canada’s downturn in exports. All export, such as industrial goods and materials, metals, and other consumer goods sectors, grew in August except the auto sector. The drop in car imports caused the slip of 0.5% in the overall imports of Canada. However, August was not enough to change Canada’s declining rate of trade. This article connects to Accounting for Merchandising Business in the text in chapter 11 because the exports and imports to Canada affect the economy in turn affecting businesses. Let’s use the decrease in car imports to Canada as an example to show its effect. If there are fewer imports of cars, then wholesalers can’t purchase as many cars as they could have to sell them to retailers. This will affect the auto sector because their cost of merchandise purchased will be lower. There will also be fewer goods available for sale. Another factor that will affect the accounting process for cost of goods sold is that the economy is not doing that well. So there won’t be many consumers purchasing cars from automotive businesses. Thus leading to lower sales (merchandise sold). Overall, it will affect the gross profit of the business since it is basically subtracting sales from the cost of goods sold. I think that it is important to keep up with current events if you are a business owner or if you plan in opening a certain type of business. Certain things that occur can affect how much your business might make in profit. The U.S. as our neighboring country has big influence on our markets from trading. Some current events might also affect your accounting procedure. For my example before, just some of the values would have changed for the income statement. This will also give you a clue to the behavior of consumers at a given time, such as in a recession or when there is a deficit. It will also help you decide what type of business or merchandises you want to open or sell. Banks will be on top of things, so you would want to know when it is best to borrow money. Overall, knowing about trades and how it affects the economy will be a useful tool for you to have.
