## What Is Additional Paid-In Capital?

Additional paid-in capital is a journal entry on the balance sheet that addresses the amount investors pay for a company's stock above par value. It is otherwise called the share premium, or capital surplus. At the point when investors buy into a company's capital stock, that capital stock is ordinarily sold over its par value and turns into its paid-in capital.
For publicly traded companies, additional paid-in capital is the difference between the shares' par value and the amount investors pay for shares at a company's initial public offering. This difference is otherwise called paid-in capital in excess of par value. It is included in the shareholders' equity section of the balance sheet and might be included as part of the line thing for the issuance of common and preferred stock. In different cases, it might show up as a separate line thing.
An entry for additional paid-in capital might be made on the balance sheet for a period at whatever point a company sells new shares or repurchases stock. At the point when a company issues new shares again after its IPO, this is known as a follow-on offering (or secondary offering).
Below is an illustration of an entry on additional paid-in capital for Company A. The par value records all shares being issued, which in this case addresses only common stock of 1 billion shares at \$0.01 par value per share. Since the IPO was priced at \$15 a share, that means \$15 billion in shares were sold to investors, putting its total paid-in capital at \$15 billion. With the paid-in capital at \$10 million, additional paid-in capital can be calculated at \$14.99 billion.

Company A sells 1 billion common shares, with a par value of \$0.01 per share. Its initial public offering prices the stock at \$15.Paid-In Capital
1 Billion Common Shares at \$0.01 Par Value Per Share\$10,000,000
Total Paid-In Capital\$15,000,000,000
## Why Is Additional Paid-In Capital Important? On the off chance that a company doesn't list total paid-in capital on its balance sheet, additional paid-in capital is a close measure of the total, considering that the par value figure is probably going to be small. ## Will Additional Paid-In Capital Be Negative? Par value is set at greater than zero, and additional paid-in capital can never be negative.

## Features

• The APIC is generally reserved as shareholders' equity on the balance sheet.
• To be the "additional" part of paid-in capital, an investor must buy the stock straightforwardly from the company during its IPO.
• Additional paid-in capital (APIC) is the difference between the par value of a stock and the price that investors really pay for it.
• APIC is a great way for companies to produce cash without having to offer any collateral as a trade off.

## FAQ

### How Do You Calculate Additional Paid-in Capital?

The APIC equation is APIC = (Issue Price - Par Value) x Number of Shares Acquired by Investors.

### Is Additional Paid-in Capital an Asset?

APIC is recorded under the equity section of a company's balance sheet. It is recorded as a credit under shareholders' equity and alludes to the money an investor pays over the par value price of a stock. The total cash produced from APIC is classified as a debit to the asset section of the balance sheet, with the corresponding credits for APIC and customary paid in capital situated in the equity section.

### Why Is Additional Paid-in Capital Useful?

APIC is a great way for companies to produce cash without having to offer any collateral as a trade off. Moreover, purchasing shares at a company's IPO can be incredibly productive for certain investors.

### How Does Paid-in Capital Increase or Decrease?

Any new issuance of preferred or common shares might increase the paid-in capital as the excess value is recorded. Paid-in capital can be decreased with share repurchases.