Distinguish between Current Account and Capital Account of the balance of Payments Account on the basis of its components.

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Distinguish between Current Account and Capital Account of the balance of Payments Account on the basis of its components.


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Salim Ahmed Kawsar

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Current Account- It is the account that records imports and exports of goods, services and unilateral transfers.

Components of Current Account:

(i) Merchandise account (ii) Invisible items, and (iii) Unilateral transfers,

Capital Account - It records capital transfers such as loans and investments between one country and the rest of the world which causes a change in the asset or liability status of the residents of a country or its government.

Components of Capital Account:

(i) Private loans (ii) Movement of banking capital, (iii) official capital transactions, (iv) Reserves and monetary gold, and (v) Gold movement.

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Salim Ahmed Kawsar

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Current Account Capital Account
It includes all the receipts & expenditure which are regular in nature  It includes all the receipts & expenditure which are irregular in nature & given in lump sum.
It includes all the receipts which does not reduce assets & all the expenditures which does not add any assets.  It includes all the receipts which reduce assets & all the expenditures which add any assets. 
It includes all the receipts which does not increase liability & all the expenditures which does not reduce any liability.  It includes all the receipts which increase liability & all the expenditures which reduce liability.

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