Additional Paid In Capital

Loading the player...

What is 'Additional Paid In Capital'

Additional paid in capital is 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

BREAKING DOWN 'Additional Paid In Capital'

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. Capital Dividend

    A type of payment by a firm to its investors that is drawn from ...
  2. Contributed Capital

    An entry on the shareholders' equity section of a company's balance ...
  3. Paid In Capital

    The amount of capital "paid in" by investors during common or ...
  4. Contributed Surplus

    The amount of money that a company earns from sources other than ...
  5. Capital Surplus

    Equity which cannot otherwise be classified as capital stock ...
  6. Share Premium Account

    Usually found on the balance sheet, this is the account to which ...
Related Articles
  1. Investing

    What's Share Capital?

    Share capital, also called equity financing, is the total amount of money and property a company has received for selling its shares to shareholders.
  2. Economics

    What is a Share Premium Account?

    The share premium account is an equity account found on a company’s balance sheet.
  3. Fundamental Analysis

    Paid-Up Capital

    Paid-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, ...
  4. Investing

    Additional Paid-In Capital

    Additional 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 ...
  5. Investing Basics

    What are Issued Shares?

    Issued shares are the amount of authorized stocks a company’s shareholders buy and own. The annual report shows the number of outstanding shares.
  6. Economics

    Explaining Budget Surplus

    Budget surplus is an economic term describing a situation where revenue exceeds expenditures.
  7. Investing Basics

    What is Capital Stock?

    Capital stock refers to the number of authorized shares a corporation may issue, both common and preferred.
  8. Investing Basics

    How Dividends Affect Stockholders' Equity

    Find out how dividends affect a company's stockholders' equity and how the accounting process changes based on the type of dividend issued.
  9. Fundamental Analysis

    Analyzing Owners' Equity

    Analyzing owners’ equity is an important exercise for any shareholder.
  10. Economics

    Understanding Consumer Surplus

    Consumer surplus is an economic measure of consumer satisfaction, which is calculated by analyzing the difference between what consumers are willing to pay for a good or service, relative to ...
RELATED FAQS
  1. How do companies report the value of their capital stock?

    Find out how companies report the value of their capital stock in their financial statements, including why some companies ... Read Answer >>
  2. How does a share premium account appear on a balance sheet?

    Learn where a share premium account shows up on a balance sheet and for what purposes funds in a share premium account may ... Read Answer >>
  3. What sectors are best for an investor seeking a high annual return?

    Find out how the Securities and Exchange Commission regulates the share premium account, otherwise known as additional paid-in ... Read Answer >>
  4. Why is the value of capital stock important to public shareholders?

    Understand what capital stock is and how it's issued and authorized. Learn why the value of capital stock important to public ... Read Answer >>
  5. What types of capital are not considered share capital?

    Find out what types of capital are not considered share capital, including an explanation of the different types of share ... Read Answer >>
  6. What's the difference between a capital stock and a treasury stock?

    Learn about treasury capital stock, how to calculate a company's capital and treasury stock, and the differences between ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center