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What does balance of payments account show? Name the two parts of the balance of payments account.

Answer:

Balance of payment account shows the record of economic transactions of a country with the rest of the world. In other words, it reflects the inflow of foreign exchange into the country and the outflow of foreign exchange from the country.

The two parts of the BOP account are as follows:

(i) Current account: The Current account of BOP is that account which maintains the records of imports of goods and services as well as the record of unilateral transfers.

(ii) Capital account: Capital account of BOP is that account which records all the transactions that cause a change in the status of assets and liabilities of the government or any of the residents of a country.