Is BOP balance in accounting sense and operating sense the same? Give reasons
Dear student,
Balance of payment has two accounts one is current account and another is capital account. It always happen that when one account is in surplus then another account is in deficit by the same amount such that the sum of these two account is always zero. Thus, in accounting sense, the overall BOP will always be in balance or in equilibrium. For example, if a country is facing a Current Account deficit, then it may finance the deficit by selling its assets or by borrowing from abroad (Surplus in Capital Account).
However, in operating sense there might be a surplus or a deficit in BOP based on the autonomous items. BOP is said to be in surplus when autonomous receipts are more than autonomous payments. On the other hand, it said to be in deficit when autonomous receipts are less than autonomous payments.
Balance of payment has two accounts one is current account and another is capital account. It always happen that when one account is in surplus then another account is in deficit by the same amount such that the sum of these two account is always zero. Thus, in accounting sense, the overall BOP will always be in balance or in equilibrium. For example, if a country is facing a Current Account deficit, then it may finance the deficit by selling its assets or by borrowing from abroad (Surplus in Capital Account).
However, in operating sense there might be a surplus or a deficit in BOP based on the autonomous items. BOP is said to be in surplus when autonomous receipts are more than autonomous payments. On the other hand, it said to be in deficit when autonomous receipts are less than autonomous payments.