What is the Difference Between Capital Account and Current Account?

The capital account and current account are two components of a country's balance of payments, which record its international transactions. The main differences between them are:

1. Meaning: The current account focuses on the trade balance, net income, and direct payments of a nation, while the capital account evaluates capital expenditures and capital investments.
2. Components: The current account comprises exports, imports, investment income, and transfers. In contrast, the capital account includes foreign direct investment, portfolio investment, and foreign loans.
3. Measures: The current account measures a country's net income over a period of time, while the capital account records the net change in assets and liabilities during a particular year.
4. Transactions: The current account records actual transactions, such as imports and exports of goods and services, foreign investors' payments, and transfers like foreign aid. On the other hand, the capital account records changes in asset value through investments, loans, banking balances, and real property value.
5. Balance: The sum of the current account and capital account reflected in the balance of payments will always be equal. Any surplus or deficit in the current account is matched and canceled out by an equal surplus or deficit in the capital account.

In summary, the current account deals with the flow of money from exports, imports, and other transactions, while the capital account records the changes in a country's financial assets and liabilities due to investments, loans, and other capital-related activities.

Comparative Table: Capital Account vs Current Account

Here is a table highlighting the differences between the capital account and the current account:

The current account focuses on the net income of a country within a year and includes components such as exports/imports, investment income, and transfers. On the other hand, the capital account reflects the net change in the ownership of national assets of a country within a particular year and includes components like foreign direct investment, portfolio investment, and foreign loans.