Capital Account (Balance of Payments)

In modern international statistics, the capital account is usually a small part of the balance of payments. It includes items such as debt forgiveness, transfers linked to migrants moving their assets, certain government grants for investment projects and the purchase or sale of non-produced assets such as land used by foreign embassies, patents, trademarks and other intangible rights.

For example, if one government cancels a loan owed by another, the cancellation is recorded in the capital account of both countries.

Investment flows, such as foreign companies building factories or investors buying shares and bonds, are recorded in the separate financial account, not the capital account.

The terminology can be confusing. In older usage, and still in some textbooks and news reports, "capital account" is used to mean what is now called the financial account, covering cross-border investment flows. When reading about the capital account, it helps to check which meaning is intended.