Balance of trade is the difference between money value of imports and exports of material goods only whereas BOP is the difference between a country’s receipts and payments in foreign exchange.
The difference between the two can be summarized as follows:
| BOT |
BOP |
| 1. It records only merchandise transactions |
1. It records transactions relating to both goods and services |
| 2. It does not record transactions of special nature actions of special nature. |
2. It records transactions of capital nature. |
| 3. It is a narrow concept because it is only one part of BOP account |
3. It is wider concept because it includes balance of trade, balance of services, balance of unrequired transfers and balance of capital transactions. |
| 4. It may be favorable, un favorable or equilibrium |
4. It always remains in balance in accounting sense because receipt side is always made to be equal to payment side |
