Option 1 -> Records trade in goods, which belongs to current account.
Option 2 -> Records capital and financial asset transactions like FDI and portfolio investments.
Option 3 -> Records investment income, which is part of current account.
Option 4 -> Records transfers like remittances, which fall under current account.
Hence, Option 2: Transaction of capital and financial assets -> The capital account of Balance of Payments records all transactions involving capital and financial assets between a country and the rest of the world. This includes Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), loans, banking capital flows, and other capital transfers. These transactions represent changes in ownership of national assets and liabilities, distinguishing them from current account items which record flow of goods, services, and income. -> correct