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.