Balance of payment introduction which is from subject International Finance

Defination of BOP, National Accounts, Current Account, Capital Account

1. Balance of payment The balance of payments (BOP) is a financial statement that records a country's international financial transactions.  The BOP has three main categories: Current account, Capital account, Financial account. 

2. National Account A national account is a system of accounts and balance sheets that describes an economy.  The sum of all these transactions is the gross domestic product (GDP) of that economy. Components of national a/c : 1. Gross Domestic Product (GDP) 2. Net National Product (NNP) 3. Gross National Product (GNP)

3. Current Account The basic difference between current a/c and the capital a/c is that the former represents a transfer of real Income. The   current account   represents a country's net income over a period of time. Current account components: 1. Export and Import of goods 2. Invisibles 3. Non-monetary movement of gold capital

4. Capital Account The capital account is a record of the inflows and outflows of capital that directly affect a nation’s foreign assets and liabilities. It records transfer of funds without effecting a shift in real income. Balance of capital a/c = Foreign exchange inflow – Foreign exchange outflow Components of Capital a/c : 1. Banking and investments 2. Movements in foreign reserves 3. Long term borrowing on macro-economics level

5. Financial Account The financial account reports on the inflow and outflow of international ownership of assets. The financial accounts components: 1. long-term direct investments 2. long-term portfolio investments 3. short-term ‘hot-money’ capital flows

6. THANK YOU By – Keshav Gupta