1. Balance of Payments
Every country keeps an accounting record of international transactions between itself and the rest of the world.
The government keeps this record of transactions, but the transactions are primarily made by individual people and businesses – Not the Government.

2. Balance of Payments The balance of payments has three main categories:
The Current Account
The Capital Account
The Financial Account

3. The Current Account Current Account US Exports and US Imports
Records money coming into the US as payments for goods and services the sell to other countries (Exports) = Credits
Records money we pay to other countries for goods and services we purchase from other countries (Imports) = Debits
The current account is equal to the value of exports minus the value of imports

4. The Current Account The Current Account is the Balance of Trade
If the Current Account Balance is a Positive Number = Trade Surplus (selling more to other countries than purchasing from other countries)
If the Current Account Balance is a Negative Number = Trade Deficit (purchasing more from other countries than we are buying from other countries)

5. Balance of Payments
The Balance of Payments also records International Transactions
Stock purchases
Bond Purchases
Capital Purchases
Real Estate Purchases
All Transactions between US individuals and business to individuals and businesses in other countries.
All Transactions between Individuals and Business from other countries to US individuals and Businesses

6. Balance of Payments Ultimately, the Balance of Payments must balance.
Balance of Payments vs. Balance of Trade
Balance of Trade records Imports vs. Exports
Balance of Payments records Imports, Exports, and all financial transactions between individuals in the US and individuals in other countries.