The full form of BOP is Balance of Payments. So friends, in today’s article we are going to know about the Structure of balance of Payment (Concept of Balance of Payment). So let’s discuss in details.
Table of Contents
Concept of Balance of Payment
Balance of Payments definition – The BOP (Balance of Payment) is a summary of all international transactions of a country and its citizens during one financial year. The balance of payment is a statistical statement of transactions of visible and invisible trade of a country with rest of the world.
Structure of balance of Payment
The structure of Balance of payments (BOP) denotes the accounts of BOP. Generally, there are two accounts of a BOP.
• The Current Account – This account records all current transactions which involved either the export and import of goods and services. The goods exported or imported are termed as visible item.
On the other hand, services exported or imported are termed as invisible items. As for example – Transport, banking, insurance, etc.
• The Capital Account – The capital account represents the financial transactions of a country with rest of the world. As for example – Foreign borrowing, foreign investment, etc.
In addition to above two accounts BOP (Balance of Payment) also includes following items-
• The Account of Financial of Surplus or Deficit – The deficit on current account may be adjusted through the transactions involving the sale of gold.
Since gold is a universally accepted by the nations, the gold selling to exporting countries can obtain necessary amount of foreign exchange for discharging their foreign liabilities. It is also called official reserve of gold.
• Errors and Emissions – BOP account also include the item errors and emissions. Since a large number of items in the balance of Payment account are estimated from the incomplete data, these may be subject to errors of a certain magnitude.
So friends, this was the concept of Balance of Payment (Structure of balance of Payment). Hope you get the full details about it and hope you like this article.
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