Introduction to Finance

current account
 
is a summary
 
of the fl ow of funds between one country 
and all other countries involving the sale and purchase of goods and services plus funds from 
income-generating fi nancial assets during a specifi ed period. The balance of goods and services 
was –$508.3 billion for 2014. We reported above that the balance on goods for 2014 was –$741.5 
billion. Because the U.S. exports more services than it imports, exports less imports for both 
goods and services was only –$508.3 billion. By adding net primary income (interest, dividends, 
debt repayments, etc. from foreign investments in securities) of $238.0 billion and net secondary 
income (U.S. government and private transfers, including government grants and pensions and 
insurance-related transfers) of –$119.2 billion, results in a net current account of –$389.5 billion.
The 
capital account
is a summary of the fl ow of funds between one country and all other 
countries involving the transfer of fi nancial assets across country borders during a specifi ed 
time period. Included are transfers of patent values and fi nancial assets by individuals who 
move to another country. As currently defi ned, the capital account balance has a minor impact 
on the balance of payments. Table 6.3 shows that for 2014 capital transfer receipts were zero 
and since capital transfer payments were only $45 million (less than $0.0 billion), receipts less 
payments resulted in a balance on capital account of –$0.0 billion rounded. Adding the bal-
ance on the current account and the balance on the capital account resulted in a net borrowing 
from current account and capital account transactions of –$389.5 billion. 
The 
fi nancial account
 
is a summary of the fl ow of funds between one country and all 
other countries involving foreign investments in fi xed assets and fi nancial assets during a spe-
cifi ed time period. Included are business direct foreign investment (e.g., construction of fi xed 
assets and acquisitions of foreign companies), portfolio investments (stock and bond invest-
ments in foreign companies), and other capital investments (e.g., short-term foreign securities).