What is a Capital Account?

The capital account is an account that records the value of non-financial assets obtained or processed by economic transactions and the related savings and capital transfer activities of various institutional units, and is a continuation of the income use account. The right side of the account records various items related to capital raising, including savings and capital transfers; the left side of the account records current changes in various non-financial assets in economic transactions, including fixed capital formation, inventory changes, and valuables according to asset classification Specific items such as net acquisition, net purchase of land and other non-productive assets, the first three of which are collectively referred to as capital formation; the two parties subtract each other to form a net loan or net borrowing, which is recorded on the left side of the account as a balance item. The balance of the capital account can be used to measure the amount of net funds or borrowed funds that a unit or a department can ultimately provide directly or indirectly to other units or departments. The balance of the capital account is equal to the balance of the financial account and can be used to check the consistency of the entire set of accounts because currency transactions require simultaneous registration in the financial accounts of the two relevant units and their corresponding current accounts are recorded accordingly. And capital account. ^[1]

Capital account

The capital account is a record of international flows of capital. The capital account is the capital or

Capital Account in the Balance of Payments

The capital account is a branch of the capital and financial account, including capital transfers and the purchase and abandonment of non-financial assets. Among them, capital transfer refers to the transfer of ownership of fixed assets; asset transfers related to or conditional on the purchase and abandonment of fixed assets; debts cancelled by creditors without claiming any return. The purchase or abandonment of non-production and non-financial assets refers to transactions of various intangible assets such as patents, copyrights, trademarks, distribution rights, leases and other transferable contracts.

Capital Account from an Accounting Perspective

The lenders of this type of account register the increase in capital or retained earnings; the borrower registers the decrease in capital or retained earnings; the closing balance is on the lender, indicating the balance of the capital invested or retained earnings,

The capital account includes "paid-up capital", "capital reserve" and "surplus reserve" and other accounts. The reason why the "surplus reserve" is classified into the capital account is because the surplus reserve is the retained part of the profits of each period of the enterprise, and it is the part of the capital appreciation that the company uses the capital to engage in production and operation activities, and its ultimate ownership still belongs to the enterprise In essence, it is also the investment of the business owner in the business.