Distinguish between current account and capital account of BOP account. Mention any two transactions (components) of each.

Difference. The balance of payment account is broadly divided into two sub accounts – Balance of payment on Current Account and Balance of payment on Capital Account. Simply put, current account of BOP is that account which records export and import of goods, export and import of services and unilateral transfers (Real transactions). Capital account of BOP is that account which records transactions relating to purchase and sale of foreign assets and of foreign liabilities during a year (Financial transactions).Balance of payments has four components (items), namely, (i) exports/imports of goods, (ii) exports/imports of services, (iii) unilateral transfers, and (iv) capital receipts/payments. Briefly, first three components constitute current account whereas the last one consisting of loans, investment, banking capital etc. constitutes capital account. Another difference is that current account explains flow of actual international transactions whereas capital account is concerned with international flow of loans and investments which causes a change in assets or liability status of a country.