Briefly state the basic structure and components of a balance of payments table.

Briefly state the basic structure and components of a balance of payments table. 

Ans. Structure of Balance of Payments Accounts The balance of payments account of a nation is assembled on the doctrine of double entry book-keeping. 

Every transaction is entered on the credit and debit side of the Income Statement and assets and liabilities on the balance sheet. 

However, balance of payments accounting varies from the business accounting in one aspect. In business accounting debits (minus) are presented on the left side and credits (plus) are represented on the right side of the income statements. 

Whereas in the balance of payments accounting the practice is to present credits on the left side

Current Account 

1. The current account of a nation incorporates all transactions associating to business in merchandise and services and unrequited transfers. 

2. Service transactions comprise of costs of travel and transportation, insurance, earnings and imbursements of overseas investments etc. 

3. Transfer payments associate to gifts, subscriptions, overseas aid, remittance made by private etc. received from overseas individuals' account and government to overseas individuals. 

4. In current account goods exports and imports are the most significant items. Merchandise exports are presented as the plus item and are computed free on board which means that cost of transportation, insurance etc. are eliminated. 

5. On the right side imports are presented as a minus item and are computed based on costs, insurance and freight and are incorporated. 

6. The deviation among exports and imports of a nation is its balance of visible imports; the balance of trade is likely. 

7. In the contra crate, when imports surpasses exports it is not likely transaction. 

8. It is but services, transfer payments or invisible items of the current account that reproduce the actual picture of the balance of payments account. 

9. The balance of exports and imports of services and transfer payments is termed as the balance of hidden trade. 

10.The hidden items along with perceptible item ascertain the real present account position. If exports of merchandise and services surpass imports of merchandise and services, the balance of payments is said to be likely transaction or vice versa it is not likely transaction. 

Capital and Financial Account 

“Capital and financial account” covers receipts and payments of assets and liabilities between residents and nonresidents, and consists of two main categories: “financial account” and “capital account.” 

Changes in Reserve Assets 

“Changes in reserve assets” covers changes in those external assets that are readily available to and controlled by monetary authorities. Reserve assets include monetary gold, SDRs, and reserve positions in the IMF. Source data are based on information concerning the stock of reserve assets prepared by the Ministry of Finance.