Banking · Foreign Exchange Accounts
A large multinational bank maintains several Nostro, Vostro, and Loro accounts to facilitate international trade and remittances. During a reconciliation process, the bank discovers that a payment of 1,000,000 USD was sent from its Nostro account in New York to a third-party bank in Tokyo, but the corresponding entry was not recorded in the Mirror Account at the head office. Which of the following statements correctly defines these accounts and the appropriate accounting treatment for this discrepancy?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1A Loro account is a third-party account, and the bank should use the Loro account of the Tokyo bank to settle the discrepancy in the New York Nostro account.
- 2The Mirror Account is an exact replica of the Nostro account maintained in the bank's books in home currency, and the 1,000,000 USD payment must be recorded as a credit in the Mirror Account.✓
- 3A Vostro account is 'your account with us,' and since the payment was made from a Nostro account, it has no impact on the Vostro accounts maintained for foreign correspondent banks.
- 4A Nostro account is 'our account with you,' and the missing entry in the Mirror Account will result in a credit balance in the bank's general ledger which must be reconciled by a debit entry.
Correct answer
The Mirror Account is an exact replica of the Nostro account maintained in the bank's books in home currency, and the 1,000,000 USD payment must be recorded as a credit in the Mirror Account.
Download Single Question PDF
Save this question and verified answer as a clean study sheet with live clickable link.
👥
Share with Friends & Study Groups
Challenge your peer aspirants on WhatsApp or Telegram to solve this question!
Online Test Series
Start Free Mock Test →Preparing for Banking?
Practice full-length mock tests with real exam timers, instant score analysis, and all-India ranking.
Chapter Practice
Practice Foreign Exchange Accounts MCQs →Want more practice questions on Foreign Exchange Accounts?
Solve complete topic-wise tests with detailed solutions on GkGet.
Related Practice Questions
Recommended practice questions in Banking · Foreign Exchange Accounts