(a) What do you mean by BOP? What are its two accounts?
(b) What are the characteristics of BOP?
(a) What do you mean by BOP? What are its two accounts?
(b) What are the characteristics of BOP?
(a) Balance of payment account is defined as a systematic record of all the transactions that take place between residents of a country and residents of other countries over a given time period. Its two components are:
1. Current account: This relates to all the activities that do not alter the assets and liabilities of a country. It is the record of all the transactions for goods, services and unilateral transfers.
Following are the items of the current account :
(i) Balance of trade account or visible items
(ii) Balance of invisible accounts
(iii) Unilateral transfers etc.
2. Capital Account: It records the international transactions which affect the assets and liabilities of the domestic country.
Following are the items of capital account:
(i) Private transactions
(ii) Official transactions
(iii) Foreign direct investment etc.
(b) Following are the characteristics of BOP:
1. Systematic record: It is a systematic record of payment and receipts of a country relating to the economic transactions with other countries.
2. Fixed period of time: It is recorded for a fixed period of time, i.e., generally one year.
3. Double entry system: Transactions are recorded on the basis of double entry system according to which it always gets balanced.
(a) Balance of payment account is defined as a systematic record of all the transactions that take place between residents of a country and residents of other countries over a given time period. Its two components are:
1. Current account: This relates to all the activities that do not alter the assets and liabilities of a country. It is the record of all the transactions for goods, services and unilateral transfers.
Following are the items of the current account :
(i) Balance of trade account or visible items
(ii) Balance of invisible accounts
(iii) Unilateral transfers etc.
2. Capital Account: It records the international transactions which affect the assets and liabilities of the domestic country.
Following are the items of capital account:
(i) Private transactions
(ii) Official transactions
(iii) Foreign direct investment etc.
(b) Following are the characteristics of BOP:
1. Systematic record: It is a systematic record of payment and receipts of a country relating to the economic transactions with other countries.
2. Fixed period of time: It is recorded for a fixed period of time, i.e., generally one year.
3. Double entry system: Transactions are recorded on the basis of double entry system according to which it always gets balanced.
