What is the difference between Balance of Trade and Balance of Payment?

A balance of payments is the overall record of all economic transactions of a country with the rest of the world. A balance of trade is the difference in the value of exports and imports of only visible items. A balance of trade includes imports and exports of goods alone i.e., visible items.

The trade balance represents the difference between the value of exports and imports of goods and services and enjoys a trade surplus of the balance when the value of exports exceeding imports value. When the value of imports exceeds the value of exports, the trade balance suffers from a deficit? In the case of imports with exports, the trade balance is in equilibrium equal.

The balance of payments is more inclusive. As it takes into account the values ​​of each international exchanges so that it includes in addition to exports and imports of goods and services total financial and non-financial grants and subsidies of private and public investment and, like the trade balance it could be in deficit or surplus.

Balance of Trade is a statement that captures the country's export and import of goods with the remaining world. Only Transactions related to goods .

Balance of Payment is a statement that keeps track of all economic transactions done by the country with the remaining world. Where as here Transactions related to both goods and services are recorded.

- The balance of trade forms part of the current account  shows the net amount of a country is earning ,if is it in surplus or  spending if is it in deficit

-The balance of trade is net exports that makes up the balance of payment,so it can be favorable surplus(exports exceed imports)

- Balance of payment is the statement which keeps track of all economic transactions which done by the country.

• Balance of trade is the difference between the values of a country’s total imports and exports of goods and services. Balance of trade appears under the current account of the balance of payments.

• Balance of payments records all of the country’s transactions and inflows and outflows of funds between the local economy and foreign economies.

• The balance of payment consists of 3 main components; current account, capital account and financial account, where each account tracks different types of transactions.

• The balance of trade is narrower in scope as it does not take into consideration capital and financial transactions. The balance of payments, on the other hand, is more comprehensive as it covers all international transactions.

Balance of payment can simply be defined as the difference between total receipts and payments of a particular economy during a specified period of time. It is a summarized record of all the transactions done by the residents of a particular economy with the other economies in the world.

Balance of Payment can be calculated using following formula.

Current accounts balance + Capital account balance + Reserve balance = BOP

Balance of Trade is the difference between imports and exports of a given economy during a defined period of time. This is symbolized as net exports/net imports.

BOT = Value of Exports – Value of Imports

The differences between balance of trade (BOT) and balance of payment (BOP)  are as follows:

Balance of Trade (BOT)

i. It records only merchandise (i.e., goods) transactions.

ii. It does not record transactions of capital nature.

iii. It is a part of current account of BOP.

iv. It may be favourable, unfavourable or in equilibrium.

v. Defect in BOT cannot be met by BOP

vi. It is not true indicator of economic relations or economic prosperity of a country.

Balance of Payment (BOP)

(i) It records transactions relating to both goods and services.

(ii) It records transactions of capital nature.

(iii) It includes balance of trade, balance of services, balance of unilateral transfers and balance of capital transactions.

(iv) It always remains in balance in the sense that receipt side is always made to be equal to payment side.

(v) Defect in BOP can be met through BOT.

(vi) It is true indicator of economic performance of an economy.