According to a specific format, all international balance of payments activities are recorded to form a bill, which is the balance of international payments.

Originally, balance of payments accounting was based on payments. In other words, when conducting foreign trade, the accounts will be calculated only after the money and goods are cleared. Sell ??domestic products, exchange for foreign exchange, purchase foreign goods, spend the foreign exchange, and balance the income and expenditure. If there is a surplus, it is a trade surplus, and vice versa. This algorithm is simple and easy to implement, so it has been popular in the world for more than 200 years after the 17th century. Until the end of World War II, the international economic situation changed dramatically, and the original balance of payments accounting method gradually became no longer applicable. For example, in order to support the recovery of Europe, the United States provided a large amount of free aid to Western European countries. The money and materials were huge in amount, but they were given almost in vain, without the other countries having to pay for them. Since no actual payment has been made, according to traditional accounting methods, it should not be included in the balance of payments of both parties. If this is the case, wouldn’t the United States spend money and materials in vain, not even losing personal favor and face? In order to make up for such shortcomings, many countries have reformed their accounting methods. The balance of payments is no longer based on payments, but on transactions. As long as economic activities have occurred, regardless of payment or not, they will be included in the balance of payments of the year. ; If actual economic activities do not occur, even if the payment has been made in advance, it cannot be included in the balance of payments of the current year. Calculating revenue and expenditures in this way makes it easier for a country's authorities to grasp a complete picture of the foreign economy. The resulting accounts not only reflect actual foreign exchange revenue and expenditures, but also a comprehensive reflection of economic activities.

The economic transactions referred to in the balance of payments occur between residents and non-residents of a country. It is worth noting that residents and citizens belong to different categories. Citizens are judged based on nationality, while residents are judged based on place of residence. For example, enterprises and groups founded by foreigners should be considered residents of China as long as they carry out economic activities in China; international students and tourists who have stayed in my country for more than one year are also residents of my country. According to the regulations of the International Monetary Fund, official diplomatic envoys and military personnel stationed abroad are all non-residents of the country where they are located, while international institutions, such as the United Nations, the International Monetary Fund, the World Bank, etc., are non-residents of any country.

Although there are some subtle differences in the project settings of each country's balance of payments, in the big picture, there is no obvious difference. They are composed of three major projects: First, the current project. It also includes four sub-items, namely trade in goods, trade in services, income and current transfers. We are relatively familiar with trade in goods and services. It is necessary to say a few more words about the last two sub-projects. Income includes employee compensation and investment income. The former is the personal income obtained by non-residents of a country. For example, if a foreign visiting professor at Tsinghua University lives in China for less than one year, his legal income must be recorded separately in China and the United States. national current account. When non-residents of a country invest in their country of residence, they must calculate their investment income, including profits, interest, dividends and bonuses. Current transfer is also called unilateral transfer. If a foreign friend gives you a car, or a foreign charity donates materials to my country, such free transfer transactions must also be recorded in the current account. In December 1996, the Chinese government promised that the RMB would be freely convertible under the current account. In fact, this means that the foreign exchange required for the economic activities involved in the above four projects can be freely purchased from banks with RMB. The foreign exchange income under the current account, It can be converted into RMB and used domestically.

The second largest item in the balance of payments is capital and financial items. Capital projects refer to capital transfers, as well as the acquisition and transfer of non-financial assets. For example, when Chinese people work abroad and live for more than a year, they remit their savings to the country for investment; when Chinese companies buy out foreign patents, copyrights, trademarks, etc., they must be recorded in the capital account. The former is a capital transfer, while the latter is an acquisition of non-financial assets. Financial projects include direct investment, securities investment and other investments. According to the definition of the International Monetary Fund, if an enterprise holds more than 10% of the equity of another country's enterprise, it can be regarded as direct investment. Our country stipulates that investment exceeding 25% of the equity is regarded as foreign direct investment in China. Securities investments mainly include bonds and stocks. For example, bonds issued overseas by our government and enterprises, N shares, H shares, and some B shares must be included in securities investment projects. Investments other than the above two investments, such as import and export trade financing, loans, financial leasing, etc., are classified as other investment projects. The financial projects discussed above are divided according to investment methods. If divided according to term, it can be divided into long-term capital and short-term capital. The difference between the two is limited to whether it exceeds one year.

If the current account, capital, and financial items are true records of economic transactions, then its third item, the error and omission item, is a man-made design. A major feature of the balance of payments is "balance." In other words, from the table, income and expenditure are equal. However, people often find that the figures they have worked so hard to compile, the revenue and expenditure items are always missing. There are technical reasons for errors and omissions, such as different statistical calibers of reporting units, resulting in over-reporting and under-reporting. Of course, there are also reasons such as speculation. For example, some international hot money always changes its appearance in an attempt to avoid government control, making statistics very difficult. It's difficult. The purpose of setting up errors and omissions is to flatten the balance of payments between the current account and the capital account and maintain a formal balance in the balance of payments.

The balance of payments is prepared according to the principle of double-entry accounting. For each transaction, two records are made with equal amounts. One is counted as a debit, indicating what the country has received, and the other is recorded as a debit. Writing a loan indicates what price the country has paid. Suppose we export a batch of goods to the United States, which is reflected in the balance of payments. On the one hand, it is a debit to the capital account, indicating that we have received US dollars; on the other hand, we have to credit the goods, indicating that we have paid for the goods. If the U.S. government gives us a batch of books, there is no need to pay foreign exchange, but in order to meet the requirements of double-entry accounting, we have designed a project called unilateral transfer. While debiting the goods, it means that we have received the books. Recording the unilateral transfer as a credit means that we owe the United States a favor. The advantage of double-entry accounting is that it can comprehensively and systematically reflect the process of economic activities and keep relevant records in a balanced relationship. At the same time, it is also easy to check whether the accounts are correct, thereby improving the quality of accounting.

Maintaining balance of international payments is a major goal of macroeconomic regulation. Analyzing and studying the balance of payments will help determine whether the balance of payments is balanced. For example, if you look at the current account, if the foreign exchange income of the year is greater than the expenditure, it is called a surplus; otherwise, it is a deficit. When a country's foreign economy continues to be in surplus, the government will take measures to appreciate the exchange rate and expand the domestic economy to increase imports and reduce exports; when it continues to be in deficit, it will depreciate the exchange rate and shrink the domestic economy to increase exports and reduce imports. Combining current accounts and capital accounts for a comprehensive analysis will yield more valuable information. If the current account deficit is made up by net capital account inflows, a country will have to increase profits, interest and dividend payments in the future, even though the balance of payments appears to be balanced. If the inflow of capital is mostly short-term investment, then for a capital-importing country, once the international economic situation fluctuates and short-term capital flows out in large quantities, the country is likely to have a serious external economic imbalance.