Setup Menus in Admin Panel

Sharing the Knowledge!™

Finance Knowledge and Information

What is paid-in capital?

Suggestion/Report Error

The principal component of the shareholders’ equity section is the paid-in capital accounts.  Paid-in capital reports the total amount of equity capital invested in the company by the firm’s shareholders or through the capitalization of earnings, consisting of a company’s outstanding capital stock and paid-in surplus.  It shows the total amount of cash and contributions in kind (i.e., property and services) that have been paid into the company by its shareholders.

The paid-in surplus account shows all amounts received by the company:

  1. In excess of the par or stated share value of the issued capital stock;
  2. From the capitalization of earnings; and
  3. Through debt recapitalization.

When raising capital through a new issue of no-par shares and if a stated value is required, the stated value per share is assigned to the capital stock account, with any amount exceeding the stated value is recorded as paid-in surplus.

Paid-In Capital
      Outstanding Capital Stock
+    Paid-In Surplus              
=    Paid-In Capital

The paid-in capital account may include capitalized earnings.  The capitalization of earnings is the transfer of retained earnings to paid-in capital accounts, where it is capitalized – typically achieved by means of stock dividends.

© 2015-2024 Pecunica LLC.  All rights reserved.