Balance of Payments Account

The balance of payments account also reflects whether a country is a debtor or creditor. Additionally, it indicates whether the currency of the home country is gaining strength or weakening in relation to other foreign currencies (Yan, 2007).
In particular, the balance of payments account is an account that records various international flows of goods and services, as well as money. The exchange is normally recorded as either a negative or positive value. Various types of exports are usually assigned positive values. aspects that are assigned a positive value in the balance of payments account include the exports of financial assets, currency, products, and services. On the other hand, imports are normally assigned negative values. Aspects of the balance of payments account that are assigned negative values include the imports of financial assets, currency, goods, and services. Generally, the balance of payments accounts typically distinguishes between financial assets and products. In this regard, products refer to goods and services that are either imported or exported outside a country. Conversely, the financial assets imply the money that is either imported or exported outside a country.
Merchandise exports refer to the goods that are sold outside a country. the selling of goods to a foreign country leads to the creation of a credit entry on the balance of payments account. This is because the transaction arising from the merchandise exports normally leads to monetary claims among foreign residents and governments (Sinn and Wollmershäuser, 2012). Conversely, the transactions involving the purchase of goods from a foreign nation are treated as a debit entry on the balance of payments account. This is because the purchase of goods from abroad normally leads to monetary claims by foreigners in the home nation. Among a large number of countries in the world, merchandise exports and imports are considered to form the fundamental international transactions.