Paid in Capital
Paid-in Capital refers to the total amount of Money that a company receives from Shareholder/">Shareholders in exchange for Shares of Stock, which is above the Par Value of the Stock. It represents the funds contributed by Shareholder/">Shareholders that are not considered a Liability for the company.
Paid-in Capital is often divided into two main components:
- Common Stock: This is the amount received from issuing common Shares.
- Additional Paid-in Capital (APIC): This is the excess amount paid by investors over the Par Value of the Stock.
Example: If a company issues 1,000 Shares of Stock with a Par Value of $1 for $10 each, the paid-in Capital would be:
- Common Stock = 1,000 Shares * $1 = $1,000
- Additional Paid-in Capital = (1,000 Shares * $10) – $1,000 = $9,000
Case: A startup raises $500,000 by issuing 50,000 Shares at $10 each. The Par Value is $0.01 per Share: