capital account

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capital account

A business owner reviews the capital account in the company ledger.

Definition

  1. Noun (Finance):

    • A financial statement showing the net worth of a business or an individual at a specific point in time. It details the owner's equity, including invested capital and retained earnings.

  2. Noun (Economics / International Finance):

    • A component of a country's balance of payments that records transactions involving financial assets and liabilities between residents and non-residents. It tracks the flow of investments, such as purchases of foreign securities, direct investment, and changes in reserve assets.
Usage Examples

  • Noun (Finance):

    • The company's capital account showed a significant increase after the new investment round.
    • Partners must agree on how profits affect each person's capital account in the business.

  • Noun (Economics):

    • A surplus in the capital account can help offset a deficit in the current account.
    • The report analyzed the capital account to understand trends in foreign direct investment.
Advanced Usage
  • "Capital account convertibility": The freedom to convert local financial assets into foreign financial assets at market-determined exchange rates. It is a key aspect of financial liberalization.
    • The country is moving cautiously toward full capital account convertibility.
Variants and Related Words
  • Capital (n): Wealth in the form of money or assets owned by a person or organization or available for a purpose such as starting a company or investing.
  • Current Account (n): The part of the balance of payments recording a nation's exports and imports of goods and services, primary income, and secondary income. It is often discussed in contrast to the capital account.
  • Financial Account (n): In modern balance of payments accounting (IMF standards), this has largely superseded the term "capital account" for recording cross-border financial transactions. The "capital account" in this system now records specific capital transfers and acquisitions/disposals of non-produced, non-financial assets.
Synonyms
  • For Finance: Owner's equity statement, equity account.
  • For Economics: Financial account (in modern terminology, though nuances exist).
Related Phrases
  • Balance of payments: A record of all economic transactions between the residents of a country and the rest of the world in a given period. The capital account is a major part of it.
    • A country's balance of payments must always balance, with surpluses in one account matched by deficits in another.
  • Capital inflow/outflow: Movements of investment into or out of a country, recorded in the capital account.
    • The policy change triggered a large capital inflow.
capital account

A business owner reviews the capital account in the company ledger.

Noun
  1. (finance) an account of the net value of a business at a specified date
  2. (economics) that part of the balance of payments recording a nation's outflow and inflow of financial securities