In the balance of payments, the capital account records?

• A. The purchase and sale of fixed assets such as machinery
• B. The trade balance
• C. Currency reserves
• D. Income from services

Answer: (A)

In the balance of payments, the capital account is about capital transfers and the acquisition or disposal of fixed, non-produced assets between residents and non-residents. Purchasing or selling fixed assets such as machinery involves transferring ownership of real capital across borders, which is a capital transaction rather than a trade in goods/services or a financial asset move. So, the purchase and sale of fixed assets fits squarely in the capital account.

By contrast, the trade balance is a current account item, income from services is also part of the current account, and currency reserves are recorded under the financial account as reserve assets.