What is the difference between 'capital account' and 'current account'?

In economics, the current account records trade in goods/services and income flows (like wages, dividends). The capital account records transactions in financial assets and liabilities (like stocks, bonds, real estate). They are two main components of a country's Balance of Payments.

Is a 'capital account' the same as a bank account?

No, not typically. It is an accounting record, not a specific bank account. It's a ledger tracking ownership equity in a business or a nation's international investment position.

Can an individual have a capital account?

Yes, in the context of a business partnership or an LLC, each owner/investor has a personal capital account that tracks their contributions, share of profits/losses, and withdrawals.

Why might a country restrict capital account transactions?

To control volatile cross-border money flows that can destabilise the domestic currency and financial system, especially in emerging economies. This is known as 'capital controls'.

Is “capital account” formal?

Capital account is usually formal, technical, academic, business/finance in register.

How do you pronounce “capital account”?

Capital account: in British English it is pronounced /ˌkæp.ɪ.təl əˈkaʊnt/, and in American English it is pronounced /ˌkæp.ə.t̬əl əˈkaʊnt/. Tap the audio buttons above to hear it.

capital account: meaning, definition, pronunciation and examples

C1-C2 / Specialized

UK/ˌkæp.ɪ.təl əˈkaʊnt/US/ˌkæp.ə.t̬əl əˈkaʊnt/

Formal, Technical, Academic, Business/Finance

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Quick answer

What does “capital account” mean?

A record of a nation's net transactions in foreign assets, or a financial record of an individual's or company's equity contributions and retained earnings.

Audio

Pronunciation

Definition

Meaning and Definition

A record of a nation's net transactions in foreign assets, or a financial record of an individual's or company's equity contributions and retained earnings.

In economics, it refers to the part of the balance of payments which records net changes in ownership of national assets. In accounting and finance, it refers to an account representing an owner's investment in a business, tracking contributions, withdrawals, and accumulated profits.

Dialectal Variation

British vs American Usage

Differences

Terminology is largely identical in both varieties. The concept is standardized in international economics and accounting. Minor stylistic differences may appear in accompanying descriptive text.

Connotations

Neutral and technical in both varieties. No significant cultural or connotative differences.

Frequency

Equally frequent in relevant technical contexts (economics, finance, business reporting) in both the UK and US.

Grammar

How to Use “capital account” in a Sentence

The capital account records...A surplus/deficit in the capital accountTo credit/debit the capital accountContributions to the capital account

Vocabulary

Collocations

strong

balance of paymentsfinancial accountcurrent accountowner's capital accountrecord a surplus/deficitforeign direct investment

medium

national capital accountprivate capital accountcapital account liberalisation/liberalizationcapital account transactionscapital account convertibility

weak

open a capital accountmanage the capital accountcapital account positioncapital account data

Examples

Examples of “capital account” in a Sentence

noun

British English

The UK's capital account showed a significant inflow due to increased foreign investment.
Each partner's capital account must be maintained separately in the partnership records.

American English

The U.S. capital account surplus reflected strong foreign purchases of Treasury securities.
She made an additional contribution to her capital account in the firm.

Usage

Meaning in Context

Business

Refers to the section of a company's balance sheet that details the owners' or shareholders' invested capital and retained earnings.

Academic

In economics, a macroeconomic aggregate measuring cross-border flows related to investments and loans, distinct from trade in goods and services.

Everyday

Rarely used in everyday conversation. Might be encountered in news about national economics or in personal/business finance contexts.

Technical

A specific ledger account in bookkeeping; a component of the Balance of Payments framework in international economics.

Vocabulary

Synonyms of “capital account”

Strong

balance of payments: capital account

Neutral

financial account (in BoP context)equity accountowner's equity

Weak

investment accountproprietorship account

Vocabulary

Antonyms of “capital account”

current account (in BoP context)revenue accountdrawing account

Watch out

Common Mistakes When Using “capital account”

Confusing 'capital account' with 'current account' in economics.
Using it as a general term for a bank account holding large sums.
In business, confusing the owner's capital account with a loan account or a revenue account.

FAQ

Frequently Asked Questions

: In economics, the current account records trade in goods/services and income flows (like wages, dividends). The capital account records transactions in financial assets and liabilities (like stocks, bonds, real estate). They are two main components of a country's Balance of Payments.
: No, not typically. It is an accounting record, not a specific bank account. It's a ledger tracking ownership equity in a business or a nation's international investment position.
: Yes, in the context of a business partnership or an LLC, each owner/investor has a personal capital account that tracks their contributions, share of profits/losses, and withdrawals.
: To control volatile cross-border money flows that can destabilise the domestic currency and financial system, especially in emerging economies. This is known as 'capital controls'.
: A record of a nation's net transactions in foreign assets, or a financial record of an individual's or company's equity contributions and retained earnings.
: Capital account is usually formal, technical, academic, business/finance in register.
: Capital account: in British English it is pronounced /ˌkæp.ɪ.təl əˈkaʊnt/, and in American English it is pronounced /ˌkæp.ə.t̬əl əˈkaʊnt/. Tap the audio buttons above to hear it.

Phrases

Idioms & Phrases

“Capital account convertibility”
“Capital account crisis”

Learning

Memory Aids

Mnemonic

Think of the 'capital' as the owner's financial 'stake' in something, and the 'account' as the book where that stake is tracked.

Conceptual Metaphor

ECONOMY/COMPANY IS A HOUSEHOLD: The capital account is like the family's ledger for savings and property investments, separate from the daily shopping (current account).

Practice

Quiz

Fill in the gap

In the balance of payments, the covers trade in goods and services.

Multiple Choice

In a corporate balance sheet, the 'capital account' primarily represents: