The Balance of Payments
The Balance of Payments
A country's balance of payments summarizes international transactions between domestic and foreign residents. A more comprehensive definition follows:
The balance of payments is a statistical statement for a given period showing (a) transactions in goods, services, and income between an economy and the rest of the world; (b) changes of ownership and other changes in the economy's monetary gold, special drawing rights, and claims on and liabilities to the rest of the world; and (c) unrequited transfers and counterpart entries that are needed to balance, in the accounting sense, any entries for the foregoing transactions and changes which are not mutually offsetting."
The concept of double-entry accounting holds true in the balance of payments. This implies that each transaction has two entries of equal value that must be accounted for. Debit entries have a negative arithmetic sign, and credit entries have a positive arithmetic sign. The debit entries reflect payments by domestic to foreign residents, and credit entries reflect payments by foreign to domestic residents. Although this appears simple, transactions are not recorded as they are in elementary accounting. In balance-of-payments statistics, export data may come from customs records, and the payment may come from a different source. In addition, errors may occur in recording transactions and many items must be estimated, such as expenditures by tourists. Thus the balance-of-payments statistics include an account called "Errors and Omissions," which is used to balance the total debits and credits.
Table 8.3 provides balance-of-payments data for the United States. Notice that the United Nations keeps balance-of-payments data in SDRs but also provides a conversion rate at the bottom of the table.
A country's balance of payments summarizes international transactions between domestic and foreign residents. A more comprehensive definition follows:
The balance of payments is a statistical statement for a given period showing (a) transactions in goods, services, and income between an economy and the rest of the world; (b) changes of ownership and other changes in the economy's monetary gold, special drawing rights, and claims on and liabilities to the rest of the world; and (c) unrequited transfers and counterpart entries that are needed to balance, in the accounting sense, any entries for the foregoing transactions and changes which are not mutually offsetting."
The concept of double-entry accounting holds true in the balance of payments. This implies that each transaction has two entries of equal value that must be accounted for. Debit entries have a negative arithmetic sign, and credit entries have a positive arithmetic sign. The debit entries reflect payments by domestic to foreign residents, and credit entries reflect payments by foreign to domestic residents. Although this appears simple, transactions are not recorded as they are in elementary accounting. In balance-of-payments statistics, export data may come from customs records, and the payment may come from a different source. In addition, errors may occur in recording transactions and many items must be estimated, such as expenditures by tourists. Thus the balance-of-payments statistics include an account called "Errors and Omissions," which is used to balance the total debits and credits.
Table 8.3 provides balance-of-payments data for the United States. Notice that the United Nations keeps balance-of-payments data in SDRs but also provides a conversion rate at the bottom of the table.
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