Balance of Payments and Balance of Trade

Introduction:

The balance of paymentsis an accounting record of a country's transactions with the rest of
the world. It shows the countries receipts and payments from trade transactions with other countries.
A balance of payments always balances i.e. it sums to zero. The debit entrieswhich consists of
transactions using foreign exchangemust equal the credit entrieswhich consists of transactions
earning foreign exchange.

The balance of tradeis the difference between the value of exported goodsand the value of
imported goods. It represents a section of the overall balance of payments and is found in the
current accountsection of the balance of payments. It gives a balance for visible trade only.