BALANCE OF PAYMENT
Meaning of Balance of Payment:
1) The balance of payments of a country is 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.
2) The term ‘residents’ is broadly interpreted as all individuals, businesses and governments and their agencies.
3) The balance of payments record is maintained in a standard double-entry book-keeping method.
4) International transactions enter into the record as credit or debit.
5) The transactions consist of imports and exports of goods, service and capital, as well as transfer
payments, such as foreign aid and remittances.
6) These transactions play an important role in the complex mechanism of development, attainment of social and economic welfare of the citizens, stability of income, prices, employment etc.
Features of BOP:
1) BOP is systematic record of receipts and payment of a country with other countries.
2) It is a statement of accounts pertaining to a given period of time, usually, a year.
3) BOP includes all the three items that is, visible, invisible and capital transfers. Thus it is a comprehensive measure of a country’s position.
4) Receipts and payments are recorded on the basis of the double entry system. As a result debit and credit sides of accounts are automatically kept in balance.
5) If there is any difference in actual total receipts and payments, there is a need for necessary adjustment.
6) BOP includes receipts and payments of all items, government and non-government.
0 Comments