Additional Paid In Capital


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


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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.

  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Par Value

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