What is the balance of payments?

The balance of payments is an accounting document in which all the economic transactions that have been carried out between a country and the other countries of the world during a period are collected. The balance of payments in macroeconomics shows the relationship that exists between what a country invests abroad, and the investment that comes from other countries.

The balance of payments uses a double entry system, whereby all seatingThey have a double record in the debit item and in the credit item. Therefore, the final balance must be 0 and there can be no deficit or surplus.

Structure of the balance of payments

The structure of the balance of payments is divided into 4 sub-balances, called accounts, where all the money movements of the country in question are found. These four accounts are:

  • Current account: collects all money transactions in which the country has been involved.
    • Balance of goods: also known as balance of trade. Records all the purchase and sale of goods.
    • Balance of services: it contains all the data that is produced in relation to the services sector.
    • Income balance: refers to the relationship of income obtained by the owners of work and capital.
    • Balance of transfers: collects all money movements between people who live in the country and people who reside outside it.
  • Capital account: all capital transfers and other types of movements that refer to real investments appear.
  • Financial account: this account records all movements that are of a financial nature.
  • Errors and omissions account: it is also known as determined capital. As it is a double entry system, this account is used in accounting as a counterpart for money that cannot be balanced, and therefore the balance is not 0.

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