Balance of payments on current account records the earnings and expenditure of foreign exchange by a country during a tear.

These earnings (inflows of foreign exchange) arise due to transactions in (i) goods and (ii) services.

Goods are also known as merchandise or  visible items. Service are known as invisible items. Exports of goods and service are recorded as credits, whereas imports of goods and services are recorded as debits.

The total value of exports of goods and services during a year may be equal to, more than, or less than the total value of imports of goods and services during the year.

Therefore,

•    Balance of payments on current account amy be in surplus, if the total value of exports of goods and services is greater than the total value of imports of goods and services.

•    Balance of payments on current account may be in deficit, if the total value of exports of goods and services is less than the total value of imports of goods and services.

•    Balance of payments on current account may be in balance, if the total value of exports of goods and services is equal to the total value of imports of goods and services.

For more help in Balance of Payments on Current Account click the button below to submit your homework assignment