Components of Current Account are as follows:
i. Export and import of goods (visible items) - Majority of transactions in foreign trade are in the form of export and import of goods, i.e. visible items. Payment for these import of goods is shown on the negative side, i.e. debit items and receipts from exports are shown on the positive side, i.e. credit items.
ii. Export and import of services (invisible items) - These include a large variety of non factor services sold and purchased by the residents of a country to and from the rest of the world. Payments are made to other countries for use of their services and payments are received for rendering our services to other countries. Shipping, Banking and Insurance generally fall into the category of services. Payments are recorded on the negative side and receipts on the positive side.
iii. Unilateral transfers to and from abroad - They include one way transactions like gifts, donations and remittances. These transactions take place without any service in return. Receipts are shown on the credit side and transfers to rest of the world on the debit side.
Balance of Payments (BOP) of a country is a systematic record of all the economic transactions between the residents and non-residents of a country during an accounting year.
Balance of Trade refers to the difference between export and import of goods, i.e. only the visible items of economic transactions is termed as Balance of Trade.
Balance of Trade = Export of Goods - Import of Goods.
The Balance of Trade (BOT) need not balance itself, i.e. it is not necessary that export of goods is always equal to import of goods. BOT can also be surplus or deficit.
Current account balance Current Account is that account of BoP, which records exports and imports of visible and invisible items and unilateral transfers.