Paid-in capital (also paid-up capital and contributed capital) is

capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used f ...

that is contributed to a corporation by

investor An investor is a person who allocates financial capital with the expectation of a future Return on capital, return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some specie ...

s by purchase of stock from the corporation, the

primary market :''"Primary market" may also refer to a market in art valuation.'' The primary market is the part of the capital market that deals with the issuance and sale of securities to purchasers directly by the issuer, with the issuer being paid the procee ...

, not by purchase of stock in the open market from other stockholders (the

secondary market The secondary market, also called the aftermarket and follow on public offering, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. The initial sale of the s ...

). It includes

share capital A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. "Share capita ...

(capital stock) as well as additional paid-in capital. The paid-in capital account does not reflect the amount of capital contributed by any specific investor. Instead, it shows the aggregate amount of capital contributed by all investors. However, the term has different definitions in different contexts. For example, it could refer to the money that a company gets from potential investors, in addition to the stated (nominal or par) value of the stock, which coincides with the definition of

additional paid-in capital Capital surplus, also called share premium, is an account which may appear on a corporation's balance sheet, as a component of shareholders' equity, which represents the amount the corporation raises on the issue of shares in excess of their par v ...

, or

paid-in capital in excess of par Capital surplus, also called share premium, is an account which may appear on a corporation's balance sheet, as a component of shareholders' equity, which represents the amount the corporation raises on the issue of shares in excess of their par v ...

. One should be aware of the use of the term and the abbreviation, which can confuse.

Basic concepts

Paid-in Capital (a.k.a. Contributed Capital) = A + B : * A =

Share capital A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. "Share capita ...

/Capital stock (

Common stock Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other Com ...

plus

Preferred stock Preferred stock (also called preferred shares, preference shares, or simply preferreds) is a component of share capital that may have any combination of features not possessed by common stock, including properties of both an equity and a debt ins ...

) * B = Additional paid-in capital (a.k.a. Paid-in capital in excess of par.)

Additional Paid-in Capital

* Excess received from shareholders over the

par value Par value, in finance and accounting, means stated value or face value. From this come the expressions at par (at the par value), over par (over par value) and under par (under par value). Bonds A Bond_(finance), bond selling at par is priced at 1 ...

(or stated value) of the stock issued; also called ''contributed capital in excess of par''. * For example, if 1,000 shares of $10 par value common stock are issued by a corporation at a price of $12 per share, the additional paid-in capital is $2,000 (1,000 shares × $2). Additional paid-in capital is shown in the

Shareholders' Equity In finance, equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets. For example, if someone owns a car worth $2 ...

section of the balance sheet.

Basic concepts

Additional Paid-in Capital

See also