IntroductionBalance of payments (BOP)accounts are an accounting record of allmonetary transactions between a country and the rest of the world.These transactions include payments for the country's exports andimports of goods & services, financial capital, and financial transfers.A country has to deal with other countries in respect of 3 items:-Visible itemswhich include all types of physical goods exported andimported.Invisible itemswhich include all those services whose export andimport are not visible. e.g. transport services, medical services etc.Capital transferswhich are concerned with capital receipts andcapital payment.
Definition-According toKindle Berger, "The balance of payments of acountry is a systematic record of all economic transactionsbetween the residents of the reporting country and residentsof foreign countries during a given period of time".
FeaturesItisasystematicrecordofalleconomictransactionsbetween one country and the rest of the world.It includes all transactions, visible as well as invisible.It relates to a period of time. Generally, it is an annualstatement.It adopts a double-entry book-keeping system. It has twosides: credit side and debit side. Receipts are recorded onthe credit side and payments on the debit side.
Components of BOP1.Current Account BalanceBOP on current account is a statement of actual receiptsand payments in short period.It includes the value of export and imports of both visibleand invisible goods. There can be either surplus or deficitin current account.Thecurrentaccountincludes:-export&importofservices,interests,profits,dividendsandunilateralreceipts/payments from/to abroad.