What are the three components of a country's balance of payments?

Balance of payment is a record of all the transactions
that a nation makes with entities outside its borders. The data collected while creating
the balance of payments can be divided into three components. These are current account,
capital account and differences in foreign exchange
reserves.

Under the current account section, a record is
made of transactions related to funds coming into the nation and leaving the nation due
to sale and purchase of goods and services. The current account also contains entries of
funds that leave the nation when citizens spend abroad and the funds that foreigners
bring into the nation.

The sale and purchase of foreign
securities and the bilateral transfer of funds as investments is recorded in the capital
account. These funds can be used to invest in industries across the border, transact in
securities of other nations, etc.

The final component of
the balance of payment is all changes in foreign exchange reserves. This is actually
dependent on the current and capital account. If the total funds entering a nation are
more than the funds that leave, the foreign exchange reserves rise; else there is a drop
in the foreign exchange reserves.