Paid in capital

Written by Fmi.Online Saturday October 9, 2021
Paid in Capital is the amount of cash or other assets that owners put into a company for stock. Notice that paid in capital can exist with either a contribution of cash or assets. This is particularly important for new and start up corporations. A lot of time new companies don’t need cash as much as they need equipment. Investors can contribute equipment and receive stock in exchange.

Explanation :

In a nutshell :

  • Paid-in capital is the full amount of cash or other assets that shareholders have given a company in exchange for stock, par value plus any amount paid in excess.
  • Additional paid-in capital refers to only the amount in excess of a stock's par value.
  • Paid-in capital is reported in the shareholders' equity section of the balance sheet.
  • It is usually split into two different line items: common stock (par value) and additional paid-in capital.
  • Paid-in capital can be a significant source of capital for projects and can help offset business losses.
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