BALANCE OF PAYMENTS

CAPITAL ACCOUNT AND FINANCIAL ACCOUNT

Presented by: Charan Teja. R 12208

 The capital account covers all transactions that involve

receipts or payments of capital transfers and acquisition or disposal of non-produced non-financial assets.

The financial account covers all transactions

associated with changes of ownership in the foreign financial assets and liabilities of an economy.

Non-produced non-financial assets include: natural resources; contracts, leases, and licenses; and marketing assets (and goodwill).

CAPITAL TRANSFERS
A Capital transfer consists of:

(i) the transfer of ownership of a fixed asset or (ii) the forgiveness of a liability by a creditor when no counterpart is received in return. A transfer of cash is a capital transfer when it is linked to, or conditional on, the acquisition or disposal of a fixed asset (for example, an investment grant) by one or both parties to the transaction. It should result in a commensurate change in the stocks of assets of one or both parties to the transaction. large and infrequent.

Direct Investment
A category of international investment made by a

resident entity in one economy (direct investor) with the objective of establishing a lasting interest in an enterprise resident in an economy other than that of the investor (direct investment enterprise).

Portfolio Investment
cross-border transactions and positions involving debt or

equity securities, other than those included in direct investment or reserve assets

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