The Balance of Payments (BOP) is a declaration that keeps track of all monetary transfers between citizens of a nation and the rest of the world over a given period. This declaration summarizes all transfers made by/to individuals, corporations, and the government and aids in the tracking of funds for economic development. In an optimal case, the BOP can amount to zero when all of the components are correctly included. This assumes that fund inflows and outflows should be equal.
A country’s BOP statement shows if the country has a fund balance or deficit i.e. whether a country’s exports exceed its imports, the BOP is considered to be in surplus. A BOP deficit, on the other hand, means that a country’s imports exceed its exports. The BOP expenditure tracking scheme is identical to the double-entry accounting system. This implies that each transaction would have a debit entry and a credit entry.
