What is Balance of Trade?
The balance of trade is the distinction between the value of a nation’s imports and exports for a given time frame. The BoT is the largest constituent of a nation’s balance of payments. Economists utilise the BoT to compute the associative potency of a nation’s economy. The BoT is also known as the trade balance or the international trade balance.
What is Balance of Payment?
The balance of payments is a statement of all transactions that are made between entities in one nation and rest of the world over a particular time frame, such as a quarter or a year. To put it in other words, the BoP is a set of accounts that identifies all the commercial transactions operated by the nation in a specific period with the remaining nations of the world. It documents a record of all the monetary transactions performed globally by the nation on goods, services and income during the year.
This article is a ready reckoner guide for all the students to learn the difference between the Balance of Trade and Balance of payments.
|Basis||Balance of Trade||Balance of Payment|
|Meaning||Balance of Trade or BoT is a financial statement that captures the nation’s import and export of commodities with the rest of the world.||Balance of Payment or BoP is a financial statement that keeps track of all the economic transactions by the nation with the rest of the world.|
|Records||Goods related transactions.||Transactions associated to both goods and services.|
|Capital Transfers||Not included in BoT.||Included in BoP.|
|Which is better?||Just a partial view of the nation’s economic status is furnished.||A clear and complete view of the nation’s economic status is furnished.|
|Result||BoT can either be favourable, unfavourable or balanced.||Both the receipts and payments sections tallies.|
|Component||Component of Current Account of the Balance of Payment.||Both Current and Capital account.|
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