The United States's Balance of Payments - Essay Example

A transaction is generally referred to as the exchange of an asset for another or an asset for many other assets. International transactions are listed in the balance of payments on a double entry basis as in business accounting. This principle enables each transaction to yield two offsetting entries with values equal so that the debit and credit entries balance each other. Transactions are valued according to the market prices and are recorded in occurrence of a change of ownership. Changes of ownership on goods, services, and unilateral transfers make up the current account, transactions in financial assets and liabilities constituting the capital account.

According to International Monetary Fund in its strife for international comparability, balance of payment refers to “ a statistical statement for a given period showing (1) transactions in goods, services, and income between an economy and the rest of the world, (2) changes of ownership and other changes in that economy’s monetary gold, special drawing rights, (SDR’s), and claims on and liabilities to the rest of the world, and (3) unrequited transfers and counterpart entries that are needed to balance, in the accounting sense, any entries for the foregoing transactions and changes which are not mutually offsetting.

” In United States, balance of payments is prepared by the Bureau of Economic Analysis (BEA) and the U.S. Department of commerce on quarterly basis. In this view, an economy is considered to be composed of economic entities with a closer degree of association to given territory than with the other. In U.S. balance of payments, the economy is made of over 50 states. Balance of payments according to the principle of double-entry of business accounting provides for every increase in an asset to be offset by decreases in other assets or increases in liabilities.

As such, an increase in an