0 Pooja Sharma Asked: July 16, 2019In: Commerce An Adverse balance of payment is always a sign of weakness in the economy. Comment 0 International Business Finance 1 Answer Voted Oldest Recent Best Answer admin Added an answer on July 16, 2019 at 11:45 pm Balance of Payment of a country is considered to be one of the imperative indicators for International Trade, which significantly affect the economic policies of a government. As every country struggle to have a favourable balance of payments, the trends in and the position of, the balance of payments will considerably influence the nature and types of regulation of export and import business in particular. Balance of Payments is a methodical and abstract record of a country’s economic and financial transactions with the rest of the world over a given period of time. The balance of trade takes into account only the transactions arising out of the exports and imports of the visible terms; it does not consider the exchange of invisible terms such as the services rendered by shipping, insurance and banking; payment of interest, and dividend; expenditure by tourists, etc. However, the balance of payments takes into account the exchange of both the visible and invisible terms. Hence, the balance of payments presents a better picture of a country’s economic and financial transactions with the rest of the world than the balance of trade. The transactions that fall under balance of payments are recorded in the standard double-entry book-keeping form, under which each international transaction undertaken by the country results in a credit entry and a debit entry of equal size. As the international transactions are recorded in the double-entry book-keeping form, the balance of payments must always balance. In other words, the total amount of debts must equal the total amount of credits. Sometimes, the balancing item, error and omissions, is required to be added to balance the balance of payments. 2 Reply Share Share Share on Facebook Share on Twitter Share on LinkedIn Share on WhatsApp Leave an answerLeave an answerCancel reply Featured image Select file Browse Save my name, email, and website in this browser for the next time I comment.