Essay on Balance of payment

The balance of payments is a summary account of all commercial activities over a span of time between a country ‘s inhabitants and the rest of the world. It thus tracks the cash value of the flows between countries of goods and services, the acquisitions and sales of all sorts of money, and the payments made or obtained from the rest of the world.

Cash receipts from overseas are known as credits and are entered with a favourable sign in the accounts. Nation currency outflows are considered as debits and are reached with a negative symbol.

Balance of payment is broken into two broad components. One portion deals with payments, profits and transfers for goods and services. This is known as the account that is present. The other section tracks wealth transfers which are referred to as capital and financial accounts.