Definition: Capital and Financial Account
Balance of Payments, IMF
The Capital and Financial Account is one of the major components of the Balance of payments.
The standard components of the Balance of Payments are comprised of two main groups of accounts:
- the current account refers to goods and services, income, and current transfers;
- the capital and financial account refers to (i) capital transfers and acquisition/disposal of non-produced, non-financial assets and (ii) financial assets and liabilities. The Capital and Financial Account of the balance of payments is divided into two main categories:
-the capital account and
-the financial account.
The capital account covers all transactions that involve the receipt of payment of capital transfers and acquisition/disposal of non-produced, non-financial assets. The financial account covers all transaction associated with changes of ownership in the foreign financial assets and liabilities of an economy. Such changes include the creation and liquidation of claims on, or by, the rest of the world.
International Monetary Fund (IMF), "Balance of Payments Manual" (BOP), Fifth Edition, Washington D.C., 1993