Foreign Trade: Balance of Payments

Foreign Trade

Meaning of Balance of Payments:

It is an accounting statement that provides a systematic record of all the economic transactions, between residents of a country and the rest of the world in a given period of time.

Structure of Balance of Payments:-

a) Balanced BOP: BOP is balanced when receipts of foreign exchange are equal to payments of foreign exchange.

b) Surplus BOP: BOP is surplus when receipts of foreign exchange are more than payments of foreign exchange.

c) Deficit BOP: BOP is in deficit when receipts of foreign exchange are less than payments of foreign exchange.

Meaning of Balance of Trade:

It refers to difference between the amounts of exports and imports of visible items(goods).

Balance of Trade= Exports of goods – Imports of goods

Difference between Balance of Trade and Balance of Payments:

 Basis                                          Balance of Trade(BOT)                       Balance of Payments(BOP)

Meaning                                 It refers to difference between                       It is an accounting statement that provides a

amounts of exports and imports of               systematic record of all economic                                                                            visible items.                                                     transactions , between residents of a country                                                                                                                                     and rest of the world in a given period of time.

Components                          It includes only visible items.                          It includes visible items, invisible items and                                                                                                                                       capital transfers.

Components of Balance of Payments

a) Current Account:- It refers to an account which records of all the transactions relating to export and import of goods and services and unilateral transfers during a given period of time.

b) Capital Account:- It records all those transactions, between the residents of a country and the rest of the world, which cause a change in the assets or liabilities of the residents of the country or its government.

Click here for government certification in Foreign Trade

Share this post

18 Comments. Leave new

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.

JOB ATTITUDES
Work Life Balance – A Necessity

Get industry recognized certification – Contact us

Categories

keyboard_arrow_up