Question
What is meant by balance of payment (BOP) account?
or
What does BOP account record?
or
Where are borrowings from abroad recorded and why
Solution
Balance of Payments account. BOP account of a country is systematic record of all economic transactions between residents of the domestic country and the residents of foreign countries during a given period of time. It is a complete statement of a country’s receipts and payments in foreign exchange arising from international transactions.
• BOP account records a country's transactions in goods, services and assets with rest of the world during a given period.
• BOP is the difference between a nation's total payment of foreign exchange to foreign countries and its total receipts from them.
• Borrowing from abroad is a part of capital account of BOP account as it is a foreign liability.
