Capital account (financial accounting)

The current account, the capital account and the financial account make up a country's balance of payments (BOP). Together these three accounts tell a story about the state of an economy, its economic outlook and its strategies for achieving its desired goals. A large volume of imports and exports, for example, can indicate an open economy that supports free trade. On the other hand, a country that shows little international activity in its capital or financial account may have an underdeveloped capital market and little foreign currency entering the country in the form of foreign direct investment.In Macroeconomics and international finance, the capital account (also known as financial account) is one of two primary components of the balance of payments, the other being the current account. Whereas the current account reflects a nation's net income, the capital account reflects net change in national ownership of assets. The term "capital account" is used with a narrower meaning by the International Monetary Fund (IMF). Capital account is splited into two divisions: financial account and capital account,in which the tran saction is being recorded in its financial account.