The income balance is an accounting document that collects all income and payments, which are generated by the productive factors of a country. These productive factors are capital and labor, and they can be nationals abroad or non-residents in the country itself.
This accounting document records all operations derived from trade in goods and services, as well as operations derived from capital movements, between some countries and others. This balance is a sub-account of the current account balance, which in turn, belongs to the balance of payments.
Characteristics of the income balance
The different types of transactions are structured in three main accounts: Current account balance, capital balance and financial balance. The income balance is part of the current account balance. The set of balances will always be balanced, that is, the balance of payments balance is always zero.
The income balance is made up of two sub balances: income from work and income from capital.
- Income from work: Collects the balance between the income paid by the foreigner to domestic residents and the income paid by the country itself to foreign residents.
- Capital income: They refer to the income and payments derived from the income from capital movements (dividend and interest).
Example of the income balance
An example of earned income that is included in the income balance would be, for example, the remuneration of frontier, seasonal and seasonal workers.
An example of capital income that is included in the income balance would be, for example, interest, dividends or profits, which are generated by each of the headings included in the financial account (direct investments, investments portfolio and other investments).