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.
Investopedia Says:
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:
Balance Sheet
Capital Reduction
Contributed Surplus
New Issue
Paid In Capital
Par Value
Share Capital
Shareholders' Equity |