Nowadays, international trade is becoming a common practice. Thanks to globalization, we see that countries can engage in transactional activities with each other. In this case, there is a need to record such activities in a country’s financial report.
Consequently, there are two distinctive statements in the accounting system. These statements are called Balance of Payments (BOP) and Balance of Trade (BOT). They can be used to keep track of a country’s economic transactions done internationally.
This article is here to help you understand the differences between Balance of Payments and Balance of Trade more carefully.
Balance of Payments
The balance of Payments is a report that is used to keep track of a country’s international transactions within a certain period of time. It covers many aspects including the trade of goods and services, as well as any transactions with capital nature.
As we know, goods are things that are…