what is a balance of payments 
a country s balance of payments bop is a statement of all transactions made between entities in that country and the rest of the world over a defined period such as a quarter or a year it includes both the current account and the capital account in theory the sum of all transactions recorded in the balance of payments should be zero however exchange rate fluctuations and differences in accounting practices may prevent this in practice the bottom linea country s current account represents its imports and exports of goods and services payments made to foreign investors and transfers such as foreign aid it can be thought of as the country s net income if it is positive a surplus that indicates it exports more it important a negative deficit current account indicates that the country imports more than it exports the current account balance should be equal but opposite to the country s capital account balance which measures changes in the country s net asset ownership both measures when taken together give a picture of a country s global economic activity 