Capital Account
The capital account is a component of a country's balance of payments that records capital transfers and the acquisition or disposal of non-produced, non-financial assets. It is smaller than the current account in most countries but plays an important role in the overall balance of payments framework.[1]
Definition
The capital account records:
| Component | Description |
|---|---|
| Capital transfers | Transfers of ownership of fixed assets, and debt forgiveness. |
| Non-produced, non-financial assets | Intangible assets such as patents, copyrights, leases, and land. |
Because these transactions are relatively limited in value, the capital account is small in most countries. It is sometimes grouped with the financial account in the broader "capital and financial account".[1]
Relationship to other accounts
The balance of payments identity requires that:
- Current account + Capital account + Financial account = 0
Thus a deficit in the current account is offset by surpluses in the capital and financial accounts. Together, the capital and financial accounts show how a current account imbalance is financed.[1]