Important Points for IC 89 - Management Accounting Exam
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The Balance of Payment account is the summary of the flow of economic transactions between the residents of a country and rest of the world (ROW) during a given time period.
IMF defined BoP in its Balance of Payments Manual as a statistical statement for a given period showing: Transaction in goods, services and income between an economy and the rest of the world; Changes of ownership and other changes in the economys monetary gold, special drawing rights (SDRs), claims and liabilities to the rest of the world; Unrequited transfers and counterpart entries that are needed to balance, in the accounting sense, any entries for the foregoing transactions and changes which are not mutually offsetting.
Economic transactions include all those activities whereby two entities exchange something of economic value and involving at least two parties, either in reality, or by implication.
The BOP account has three main components: Current Account, Capital Account and Official Reserves.
The Current Account: Imports and Exports of goods and services and unilateral transfer of goods and services are entered in this account.
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