Within this section we'll identify the components that comprise the contributed capital part of stockholders' equity.
Contributed capital is the total legal capital of the corporation (par value of preferred and common stock) plus the paid-in capital.
- Par value - This is a value of preferred and common stock that is arbitral (artificial); it is set by management on a per share basis. This artificial value has no relation or impact on the market value of the shares.
- Legal capital of the corporation - This is par value per share multiplied by the total number of shares issued.
- Additional paid-in capital (paid-in capital) - This is the difference between the actual value the company sold the shares for and their par value.
Company XYZ issued 15,000 preferred shares to investors for $300,000.
Company XYZ issued 30,000 common shares to investors for $600,000.
Par value of preferred shares is $7 per share.
Par value of common shares is $15 per share.
Preferred shares: $105,000(15,000 x $7)
Common shares: $450,000(30,000 x $15)
Legal capital $555,000
Preferred shares: $195,000 ($300,000-$105,000)
Common shares: $150,000 ($600,000-$450,000)
Paid-in capital $345,000
|Legal capital + Paid-in capital = Contributed Capital|
If issued common shares have no par value, the amount the stock is sold for constitutes common stock. Preferred stock is always sold with a stated par value.
Accounting for Dividends
Small BusinessAdditional paid-in capital is an account in the equity section of a balance sheet. It represents the additional amount paid for the company’s shares over the par value of the shares. Additional ...
InvestingA stock with no par value might trade for thousands of dollars. It just depends on what the market deems it’s worth.
InvestingPaid-Up Capital is listed in the equity section of the balance sheet. It represents the amount of money shareholders have paid into the company by purchasing shares. It’s essentially two accounts, ...
InvestingShare capital, also called equity financing, is the total amount of money and property a company has received for selling its shares to shareholders.
InvestingPar value is a term used for investments that means original value. It’s also called face value or nominal value.
Managing WealthOnce, only sophisticated investors worried about the private equity industry. But now, mainstream investors are developing an interest as well.
InvestingThe share premium account is an equity account found on a company’s balance sheet.
InvestingBecause of the non-public nature of private equity, it can be difficult to the learn the lingo. We break it down here.
InvestingFind out how dividends affect a company's stockholders' equity and how the accounting process changes based on the type of dividend issued.
InvestingAnalyze Amazon's capital structure to determine what roles equity and debt play in financing operations. How has Amazon's financial leverage changed over time?