System of National Accounts
This 117 page reference is an introduction to the outdated standard called 1993 System of National Accounts:
Table 1 on page 20 is shown below:
The Capital Account is supposed to accumulate the net increase of non-financial assets and this equals the difference between aggregate total income and consumption spending. There is a statistical error however when making efforts to measure investment in nonfinancial assets and measure income and consumption via flow transactions. Anyway this is the idea that saving income really means spending for investment in nonfinancial capital. This is a tautology or economic definition of "saving" "investment" and "consumption" in the system of national accounts (SNA).
The financial accounts are efforts to measure aggregate net lending and borrowing. These are flows of credit some of which are linked to the production of nonfinancial capital (so-called saving equals investment) and some of which are linked to refinancing capital that already exists in the opening balance sheet. In theory net financial saving is zero because for every financial asset there is a matching liability.
The aggregate economy should have a financial identity which I approximate as follows:
N = F + K - L
where if the economy is closed domestic variety then financial assets F equal liabilities L and national net worth is given by N = K which is the valuation of nonfinancial assets, in monetary terms, stated in the opening and/or closing balance sheet.
If there are net exports or imports financed by net lending and borrowing via the respective domestic and foreign financial sectors then there is a net lending and borrowing factor in the net worth of the respective nations in addition to the valuation of nonfinancial assets.
The advocates of so-called Modern Monetary Theory (MMT) argue that a fiat Sovereign government that runs a persistent budget deficit provides net financial assets to the other domestic sectors. Bill Mitchell shows these financial assets accumulating in the non-government tin shed in an illustration on this blog page: http://bilbo.economicoutlook.net/blog/?p=381.
In the United States flow of funds the concept of the "balanced budget" shows up as follows:
Ns = Fs + Ks - Ls = 0
where the federal government (sovereign) kept net worth roughly equal to zero in the Integrated Macroeconomic Accounts (SNA-IMA) prior to going off the gold standard in 1971. However since then the federal government has accumulated negative net worth shown in the official published statistics. This means the government can simply debit its net worth Ns for a decrease when issuing liabilities Ls which are in demand by the investors who store financial assets in the nongovernment tin shed.
The net worth of the United States is to some degree an accounting fiction because vast tracts of federal land are given no valuation and because financial assets and nonfinancial assets are recorded at historical cost. The world seems to be content, for the time-being, to allow the federal government of the United States to provide cash flow insurance to the world financial system independent of its stated net worth.