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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, the par value of the stock and the excess over par.

The par value section of paid up capital is equal to the stock par value times the number of shares owned by shareholders. 

The second part of paid up capital is the amount paid in addition to par.

New Corp’s shares have a par value of $1.  New Corp sells 500,000 shares to investors for $7 each.  The paid up capital section of New Corp’s balance sheet will show two lines.  One line will be a stock par value in the amount of $500,000 [500,000 shares x $1 par value].  The second line will be additional paid up capital in the amount of $3,000,000 [500,000 shares x $6 share value minus par value]. Total paid up capital will be the sum of the two numbers: $3,500,000.

The amount of paid up capital is significant for potential investors and lenders.  They look at the number to determine how much money the current shareholders have put into the business, indicating how much they’re willing to risk for its success. 

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