The account of receipts and payments of the government of one country from other countries during a period of one year is called balance of payments.

According to Kindleberger, “Balance of payments is a systematic record of all economic transactions between the residents of the reporting country and residents of foreign countries during a given period of time.”

Main Items of Balance of Payments: The main items of balance of payments can be divided into two categories :

1. Items of current account: The main items of current account are :
   (a) The import and export of visible items like machinery, tea, tobacco, etc. The difference between such exports and imports is known as trade balance.
   (b) The import and export of invisible items like services of insurance companies, banks, doctors, engineers, government transactions, donations, tourism and shipping, etc.
2. Items of capital account: The capital account is made up of such terms as the inward and outward flow of money for investment and international grants and loans.