+1 862 207 3288 1. Current Account
Current account refers to that component of balance of payments account which shows the balance of trade. It discloses the design of foreign trade. It has three components:
Net exchange of goods: this refers to net exports (exports-imports)
Net exchange of services
Net transfers from abroad
Generally, the balance of current account is calculated by summing up the following components:
Goods:These refer to physical movable objects which are exchanged all over the globe. The exports of goods is taken as an inflow and hence is credited. The imports of goods lead to outflow of money and hence are debited.
Services: Services are intangible. For instance, tourism, banking etc. when a service is used by foreigner, it is credited while if a foreign service is used by domestic resident it is debited.
Income: Income is credited when a domestic individual or resident receives money from a foreign individual or company. Similarly income is debited when money is paid from a domestic entity to a foreign entity.
Current transfers: These refer to unilateral current transfers where one country provides another country with currency without taking anything in return.
The first two give us the trade balance. When exports of goods and services are less than imports of goods and services then there is a trade deficit while when exports are greater than imports there is a trade surplus.
