Balance of Trade and Balance of payment
Balance of Trade and Balance of payment same?
The Balance of trade (BOT) is the amount, by which the value of a country’s export goods exceeds the value of its imports of goods.On the other hands the balance of trade is the difference between total value of visible imported goods and total value of visible exported exported goods of a country for particular period(generally one year).
The balance of payment is defined as a systematic record of all economic transactions during the period between residents of the reporting countries.It is complete record of all kinds of receipts and payments of a country with the rest of the world in a particular period (one year).
Items of Balance of payment
Items of a imaginary balance of payment is given below:
1. Export goods
|1. Import goods|
2. Export Services
|2. Import services|
3. Foreign donation
|3. Donations to other countries|
4. Capital received from abroad
|4.Capital expenditure, investments in abroad|
5. Interest received against investment in abroad
|5.Interest against foreign investments|
Classification of items under Balance of payment
Items under the balance of payment may be classified as under:
1. Current Account
2. Capital Account
3. Unilateral Transfer Account
4. Transfer of Gold
5. Adjusting Account
Difference between Balance of Trade and Balance of Payment
Balance of Trade and Balance of Payment is not the same thing. The main difference are given as under:
1. Balance of Trade (BOT) is the difference between Imports and Exports of visible goods and Balance of Payment(BOP) is the difference between Imports and Exports of visible and invisible goods and all other economic transactions.
2. BOT includes the accounts of visible goods but BOP includes the account of visible and invisible goods and capital goods/reserve adjustments.
3. Balance of Trade is partial account and BOP is a complete account.
4. BOT is rarely balanced and BOP is always balanced.
5. Balance of Trade can not show a complete economic picture of a country and Balance of Payment cant show a complete economic picture of a country.
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