Show the difference between Current account and Capital account in Balance of Payments.
Or, Distinguish between Current and Capital Account in Balance of Payments.
Two accounts are shown in the balance of payments. One is the current account and the other is the capital account. The difference between current account and capital account is as follows :
| Current Account | Capital Account |
|---|---|
| (1) Debts that are generated in a country’s foreign trade in a year and which are associated with the current year’s national income or national expenditure are called Current account of balance of payments (BOP). | (1) Debts in foreign trade that are one-time and not associated with national income or national expenditure are called Capita account of balance of payments (BOP). |
| (2) Current accounts include tangible (goods) exports, imports and intangible (services) exports, imports, and one-sided transfers without consideration. That is, trade surplus and service surplus are subjected to Current account. | (2) Capital accounts include debt transactions that take place in every country in the world. These include income and expenditure on repaying loans abroad, income and expenditure on buying and selling property abroad, investing in share capital, borrowing and repaying loans from the World Bank, I.M.F., etc., and import-export of financial debt, etc. |
| (3) Capital movement is not involved in Current account. | (3) The movement of capital is included in Capital account. |
| (4) Current account transactions occur over a period of time and are a short-term issue. | (4) Capital account transactions occur at the end of the financial year and are a long-term issue. |
| (5) Every receipt-payment in the current account is a flowing concept like a current and circular in nature. | (5) Receipts and payments in the Capital account are fund concepts. |
| (6) From the current account, the commercial picture or situation of the country can be known at a glance. For example, if the amount of the receipts in the current account is greater than the amount of the payments, it will be reflected as a favorable current account balance. On the other hand, if the amount of receipts is less than the amount of payments, it will be reflected as an adverse current account balance. | (6) From the capital account, the amount of capital of the country or the increase or decrease in the debt can be seen. For example, if the total value received as capital is higher than the total debt value, it is reflected as the favorable capital account and if that value is less, it is reflected as the unfavorable capital account. |
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