Balance of payment

1. BOP BOTVS
BOP accounts are all accounting
transactions between a country &
& the rest of the world.
It includes:
1. Export-Import (visible &
invisible items)
2. Financial Capital
3. Capital TransfersFeatures of BOP:
1. Systematic Record
2. Includes Visible & invisible items
& Economic Transactions
3. For a certain Period of time -
Generally annually
4. Recorded by double entry
BOT refers to difference between import
& Export.
It :includes
Debit –imports, foreign aid, domestic
spending abroad and domestic
investments abroad
Credit- exports, foreign spending in the
domestic economy and foreign
investments in the domestic economy.
Features of BOP:
1. EXPORT grater than IMPORT=
Favorable BOT
2. EXPORT less than IMPORT/
IMPORT greater than EXPORT=
Unfavorable BOT
3. Only visible items(not banking

2. BOP BOTVS
Component of BOP-
1. Current account for import &
Export, profit, dividend,
interest.
2. Capital account- for
receipt, payment, capital
transaction, reserve, gold
reserve etc.
Component of BOT-
1. Current account for import &
Export, profit, dividend,
interest.

3. BOP BOTVS
Correction Method for the BOP-
Monetary Measures:
1. Deflation
2. Exchange Depreciation
3. Devaluation of currency
4. Increase in direct and indirect tax
5. Exchange control
Non-Monetary Measures:
1. Export Promotion
2. Import substitution
3. Quotas
4. Tariffs
Correction method of BOT-
1. Cost of Production
2. Cost & Availability of Raw
Materials.
3. Non-tariff barriers on health,
environment, safety standards