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New Microsoft Office Word Document

New Microsoft Office Word Document

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Published by: Arun Narayanan on Jan 12, 2013
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The balance of payments account records all the transactions between the residents of reporting (domestic) country and the residents of foreign countries (rest of the world). Such an account is called balance of payments. The transactions include sales and purchases of all types of goods and services. as and when necessary.BALANCE OF PAYMENTS CHAPTER:. Accordingly a country with foreign trade maintains an account of all its receipts and payments from and to the rest of the world. However. financial assets and any other transactions which result in the flow of money in and out of the country. Table 10. 2|Page . It is defined as “a systematic record of all economic transactions between the residents of the reporting country and residents of foreign countries during a given period of time". A country engaged in foreign trade receives payments from countries to which it exports goods and services and requires to make payments to those nations from where it imports. The figures recorded are usually in domestic currency of the reporting country.1 MEANING PAYMENTS:- AND STRUCTURE OF BALANCE OF International trade involves international means of payments. dollars. they are also expressed in internationally accepted currency like U.S. There is no unique method of presenting balance of payments record.1 presents a model balance of payments accounts by incorporating all the transactions under major heads.

1 shows all the receipts and payments grouped under major accounting heads.TABLE 10. profits and dividends paid Unilateral payments Current Account Balance ( 1 to 4 ) 5) 6) 7) Foreign investments Short term borrowing Medium and long term borrowing 5) 6) 7) Investments abroad Short term lending Medium and long term lending Capital Account Balance ( 5 to 7 ) Statistical discrepancy (Errors and Omissions) 9) Change in reserves (+) Total Receipts = Total Payments 9) Change in reserves (-) The balance of payments account in Table 10. 3|Page . profits and dividends received Unilateral receipts 2) 3) 4) Imports of services Interest.1 : BALANCE OF PAYMENTS ACCOUNT Receipts (Credits) 1) Exports of goods Trade Account Balance 2) 3) 4) Payments (Debits) I) Imports of goods Exports of services Interest.

the balance of payments is in equilibrium. when payments are greater than receipt. foreign investments and investments by foreigners.BOP' Balance of payments may be used as an indicator of economic and political stability. (iii) It relates to a period of time. Receipts are recorded on the credit side and payments on the debit side. (vi) In the accounting sense. there is surplus in the balance of payments. an annual statement. there is deficit in the balance of payments. 4|Page . visible as well as invisible. total credits and debits in the balance of payment statement always balances each other. (v) When receipts are equal to payments.Investopedia explains 'Balance Of Payments . It may also mean that the country does not export much of its currency. Features of Balance of Payments Balance of payment has the following features (i) It is a systematic record of all economic transactions between one country and the rest of the world. this could mean that there is significant foreign investment within that country. This is just another economic indicator of a country's relative value and. The BOP includes the trade balance. It has two sides: credit side and debit side. should be used with caution. (iv) It adopts a double entry book keeping system. For example. (ii) It includes all transactions. if a country has a consistently positive BOP. along with all other indicators. generally. when receipts are greater than payments.

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