Balance Of Payments- An Important Accounting Tool

Balance of Payments Your Name Subject and Section Professor’s Name April 4, 2019 A balance of payments is an important accounting tool in order for nations to be able to keep track of their transactions with other nations or entities out there. This accounting tool is mainly suited to be able to help these entities work with large volumes of numbers, while also keeping track of the varied items that are included. Specifically, these items include goods, service, remittances, and even intangible information, among others (Bhasin, 2018). Just like any other accounting measure, Balance of payments has its components, namely; (1) The Current account, (2) The capital account, and (3) the balancing account. The current account includes both merchandise and investment income. The capital account measures foreign investment in the country, as well as those investments that the country has abroad. Lastly, the balancing account allows “for changes in the official reserve assets” (DigitalEconomist.org, n.d.). As stated earlier, the “current accounts” of the BOP lists the merchandise and investment income of the nation. However, this can be further divided into the following component...