Balance of Payments

Balance of Payments

Accounting Statement – A Statement based on Double Entry

System

Which records all types of Economic Transactions

Economic Transactions – International Financial Flows+

International Financial Environment= GST+RIP

Between Resident of One country and Resident of another

Country

In a particular period of Time: Accounting Year/Financial

Year/Quarterly or Yearly
 Balance of Payment Account
Debit (Dr) - Expenses Credit (Cr) –Income
1. Visible Items Visible Items
Import of Goods Export of Goods

_
+

2. Invisible Items Invisible Items

Import of Services Export of Services

3. Unilateral Transfers Unilateral Transfers

Payments Receipts( Donation- Gifts-
No expectations Grants)
4 Capital Payments Capital Receipts

Loan to ROW- Asset Borrowing from ROW- Asset-

Created Liability
Investment in ROW- Asset Investment from ROW –
Liability

XXXX XXXX
 A Typical BOP Statement

•Current Accounts
•Capital Accounts
•Official Reserves
 A. Current Accounts
Goods Account
Export (+)
Imports (-)

Balance on Goods Account= A (I)

Services Account

Receipts as Interest and Dividends, Tourism receipts for

Travel and Financial Charges (+)
Payments as Interest and Dividends, Tourism Payments for
travel and Financial Charges ( -)
Balance on Services Account = A(II)

Unilateral Transfers

Gifts, Donations, Subsidies, received from Foreigners (+)

Gifts , Donations, Subsidies made to foreigners ( -)
Balance on Unilateral Transfer Account= A (III)

Current Account Balance= A(I) + A(II) + A (III)

B. Long term Capital Accounts
Foreign Direct Investments (FDI)
Direct Investment by Foreigners ( +)
Direct Investment abroad ( -)
Balance on FDI = B(I)

Portfolio Investment
Foreigner’s Investment in securities of the Country (+)
Investment in Securities abroad (-)
Balance on Portfolio Investment= B(II)

Balance on long term Capital Account = B(I) +B(II)

Private Short Term Capital Flows

Foreigner’s Short Term claim on the country (+)
Short Term Claim on foreigner (-)
Balance on Short Term Private Capital Account =B(III)

C. Official Reserves Account

Increase or Decrease in foreign Exchange Reserves
You are required to calculate overall balance , showing clearly
all the balances from the Following data

1. UC Corporation of USA invest in India for Rs 300,000 to

modernize its India Subsidiary