Balance of payments method is used internationally by many countries, businesses, and organizations in monetary transactions. It is imperative to understand this method if you aspire to work in any of these sectors. Students pursuing ACCA and CIMA courses are in a better position to understand this method clearly. In order to monitor these transactions, balance of payments is calculated quarterly on an annual basis.
CIMA and ACCA are international accounting professions known for their comprehensive courses that cover a wide range of accounting concepts. Successful completion of any of these study directions will help one to understand fully the balance of payments concept. These courses may be pursued online at own time and anywhere.
Balance of payments method, as covered in CIMA online study, encompasses all the trades that take place in private and public sectors. These trades are also included in the country’s money-out or money-in transactions. The money-in is known as credit, and the money-out is known as debit. In principles, there should be a zero balance between liabilities and assets. Given the economic fluctuations in the world, this zero balance rarely happen in any country as determined in balance of payments. Balance of payments method is mainly composed of financial account, capital account, and current account. These will be understood fully in CIMA and ACCA courses.
To calculate the balance of payments in a financial account, business investment, real estate investment, stock and bond investment transactions are taken into account. The government-owned assets also form part of these calculations. Moreover, foreign-owned assets and privately-owned assets are also taken into consideration. More details can be explored in CIMA online courses.
In CIMA online study, you will also acquire knowledge about the discrepancies in balance of payments due to unstable exchange rates between countries. In theory, capital account and financial account should balance the current account. However, this is a rare case in practical terms. Should there be a deficit in the current account; capital account can be used to fund the difference.
A capital account includes the fixed assets that a country has in international countries. These fixed assets are regarded as outflow of the capital account, and their sales are regarded as investment earnings and are, therefore, included in the current account. The deficit in the current account can be funded with investment earnings in the capital account. A foreign capital can also be used to fund the current account’s deficit. These accounts will be dealt with in ACCA and CIMA courses.
By studying ACCA online or CIMA online, you will be in a better position to understand the balance of payments as used internationally. Basically, the balance of payments is used internationally in monitoring the monetary flow between the countries.