Paid in Capital

Paid-in Capital refers to the total amount of Money that a company receives from shareholders in exchange for shares of Stock, which is above the Par Value of the stock. It represents the funds contributed by 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:

• Common Stock = 50,000 shares * $0.01 = $500
• Additional Paid-in Capital = (50,000 shares * $10) – $500 = $499,500