Additional Paid In Capital

A A A

DEFINITION

A value that is often included in the contributed surplus account in the shareholders' equity section of a company's balance sheet. The account represent the excess paid by an investor over the par-value price of a stock issue. Additional paid-in-capital can arise from issuing either preferred or common stock.



Additional Paid In Capital

INVESTOPEDIA EXPLAINS

For example, assume that a company issues 1 million shares with a par value of $50 per share. When the shares are purchased by investors, however, they pay $70 per share - a premium of $20 over par value. When the capital received from this issue is recorded, $50 million ($50*1 million) will be allocated to a share capital or paid-in-capital account. The excess $20 million ($20*1 million) will be allocated to the contributed surplus account as additional paid-in-capital.

Some companies will choose to separate additional paid in capital from contributed surplus on their balance sheets.


RELATED TERMS
  1. Par Value

    The face value of a bond. Par value for a share refers to the stock value stated ...
  2. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities and shareholders' ...
  3. Paid In Capital

    The amount of capital "paid in" by investors during common or preferred stock ...
  4. New Issue

    A reference to a security that has been registered, issued and is being sold ...
  5. Share Capital

    Funds raised by issuing shares in return for cash or other considerations. The ...
  6. Shareholders' Equity

    A firm's total assets minus its total liabilities. Equivalently, it is share ...
  7. Contributed Surplus

    The amount of money that a company earns from sources other than its profits, ...
  8. Capital Reduction

    The process of decreasing a company's shareholder equity through share cancellations ...
  9. Working Capital

    This ratio indicates whether a company has enough short term assets to cover ...
  10. Amortization

    1. The paying off of debt in regular installments over a period of time. 2. ...
Related Articles
  1. Why Do Companies Care About Their Stock ...
    Investing Basics

    Why Do Companies Care About Their Stock ...

  2. Reading The Balance Sheet
    Investing Basics

    Reading The Balance Sheet

  3. Stock Basics Tutorial
    Investing Basics

    Stock Basics Tutorial

  4. Top 8 Ways Companies Cook The Books
    Personal Finance

    Top 8 Ways Companies Cook The Books

  5. How Return On Equity Can Help You Find ...
    Economics

    How Return On Equity Can Help You Find ...

  6. 4 Leverage Ratios Used In Evaluating ...
    Fundamental Analysis

    4 Leverage Ratios Used In Evaluating ...

  7. How Does Goodwill Affect Stock Prices?
    Investing Basics

    How Does Goodwill Affect Stock Prices?

  8. Why is it sometimes better to use an ...
    Investing Basics

    Why is it sometimes better to use an ...

  9. How do you calculate working capital?
    Investing Basics

    How do you calculate working capital?

  10. How do changes in working capital affect ...
    Investing Basics

    How do changes in working capital affect ...

comments powered by Disqus
Hot Definitions
  1. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  3. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  4. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  5. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  6. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
Trading Center