Meaning by Balance of Payments (BoP) Balance of payments of a country is a systematic record of all economic transactions between residents of a country with residents of foreign countries in an accounting year. It records a country’s all economic transactions with the rest of the world which involves flow of foreign exchange.
In simple words it records inflow and outflow of currency from the country.
(i) Balance of payments is a flow concept, because generally it relates with one accounting year.
(ii) It is a way of listing receipts and payments in international transactions.
(iii) The term residents means those persons and institutions which resides in a country for more than one accounting year and their economic interest lie in that country.
(v) Balance of payments accounts are made on double entry system. Payments are recorded on the debit side and receipt on the credit side. Therefore balance of payment account must be balanced from accounting point of view.
