Balance of Payments (BOP)

Set of accounts that record a country’s international transactions, and which always balance out with no surplus or deficit shown on the overall basis.

A surplus or deficit can be shown in any of its three component account :

1. Current Account, covers export and import of goods and services,

 

2. Capital Account, covers investment inflows and outflows, and

 

3. Gold Account, covers Gold Inflow and Outflow.

 

BOP accounting serves to highlight a country’s competitive strength and weaknesses, and helps in achieving balanced economic growth.

Balance of Trade (BOT)

Largest component of a country’s current account in its balance of payments (BOP) accounts, its shows the difference between export earnings and import expenditure. BOT is called ‘favorable’ when the amount realized from physical exports is more than the amount spent on physical imports, otherwise called ‘unfavorable’.   Most commonly known as Trade Balance.

Accrual Basis Accounting

A system of accounting based on the accrual principal, under which revenues is recognized or recorded when earned and expenses are recognized when incurred.

 

Total of revenues and expenses are shown in the financial statements whether or not cash was received or paid out in that period. Accrual Basis Accounting conforms to the provisions of GAAP in preparing financial statements for external users, and is employed by most of the companies except the very small ones. This basis is commonly known as Accrual Accounting.

System

1. A set of detailed methods, procedures and routine created to carry out a specific activity, perform a duty, or solve a problem.

 

2. An organized, purposeful structure that consists of interrelated and interdependent  elements. These elements continually influence one another to maintain their activity and the existence of the system, in order to achieve the goal of the system.

 Features of System  :

All systems have

  • inputs, outputs and feedback mechanisms
  • maintain internal steady state despite changing external environment.

Consumer Price Index (CPI)

A measure of changes in the purchasing power of a currency, and the rate of Inflation. The Consumer Price Index expresses the current price of a basket of goods and services in terms of the prices during the same period in a previous year, to show effect if inflation on purchasing power. It is one of the best known lagging indicators.

Recall

1. Remembrance of what has been heard, seen, or otherwise, experienced, such as that of an advertisement, commercial, or demonstration.

 

2. Removal or withdrawal of a contaminated or defective good from sale by its manufacturer or producer, either voluntarily or when forced by a watchdog agency.  Sometimes a good is recalled after it has been sold, for rectification, exchange or refund.

 

3. Revocation of a judgement on a question of fact or a question of law.

Organization

A social unit of people that is structured and managed to meet a need or to pursue collective goals. All organizations a management structure that determines relationship between the different activities and the members, and subdivides and assign roles, responsibilities, and authority to carry out different tasks. Organizations are open system — they affect and are affected by their environment.