Additional Paid In Capital

AAA

DEFINITION of 'Additional Paid In Capital'

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 '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. Par Value

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

    A financial statement that summarizes a company's assets, liabilities ...
  3. New Issue

    A reference to a security that has been registered, issued and ...
  4. Paid In Capital

    The amount of capital "paid in" by investors during common or ...
  5. Shareholders' Equity

    A firm's total assets minus its total liabilities. Equivalently, ...
  6. Share Capital

    Funds raised by issuing shares in return for cash or other considerations. ...
Related Articles
  1. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  2. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  3. Investing Basics

    Why Do Companies Care About Their Stock Prices?

    Read on to learn more about the nature of stocks and the true meaning of ownership.
  4. Fundamental Analysis

    Are accounts receivable used when calculating a company's debt collateral?

    Learn how accounts receivables are recorded as assets on a balance sheet; they are used when calculating a company's total debt collateral.
  5. Fundamental Analysis

    Work In Progress (WIP)

    Work in progress, also know as WIP, is an asset on the company balance sheet. WIP is the accumulated costs of unfinished goods that are currently in the manufacturing process.
  6. Investing

    Ex Works (EXW)

    Ex Works, or EXW, is an international legal trade term specifying that the seller is responsible to make his goods ready for pick-up at his place of business.
  7. 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, ...
  8. Fundamental Analysis

    Is depreciation only used for tangible assets?

    Learn if tangible assets can be depreciated, as well as what other assets are eligible for depreciation so you can account for them accurately.
  9. Fundamental Analysis

    How do intangible assets appear on a balance sheet?

    Understand how various types of intangible assets are handled in a company's accounting and which of them you can find on a company's balance sheet.
  10. Fundamental Analysis

    How do I calculate dividend payout ratio from a balance sheet?

    Understand what the dividend payout ratio indicates and learn how it can be calculated using the figures from a company's balance sheet statement.

You May Also Like

Hot Definitions
  1. Multiplier Effect

    The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends ...
  2. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  3. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  4. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  5. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  6. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
Trading Center