FAQ: What is Balance of Payments
November 7th, 2009
The Balance of Payments (BoP) records economic transactions between residents of a country and the rest of the world.
There are two sections:
Current Account records money flows between UK & overseas residents arising from trade in goods & services and investment income from owning overseas assets
The Capital & Financial Account records money flows between UK & overseas from the purchase of fixed assets eg factories or financial assets eg shares or bank deposits.
Note that the two accounts are interlinked: Rent, Interest profits and dividends from owning overseas assets ie the capital account generates current income in the current account.
I will post on the UK Balance of Payments position for 2008 on Monday.
Related posts:
- Balance of payments
- FAQ: What is the current Balance of Payments position for the UK?
- Reading balance sheets
