Paid-in capital (also paid-up capital and contributed capital) is
capital 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 the investor usually purchases some species of pr ...
s by purchase of stock from the corporation, the
primary market 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 proceeds. A primary market means the market for new issues of securities, ...
, 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 ...
). 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 ...
(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, or
paid-in capital in excess of par. One should be aware of the use of the term and the abbreviation, which can confuse.
See also
*
Balance sheet
In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business ...
*
Capital surplus
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 ...
*
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 ...
*
Reserve (accounting)
In financial accounting, reserve always has a credit balance and can refer to a part of shareholders' equity, a liability for estimated claims, or contra-asset for uncollectible accounts.
A reserve can appear in any part of shareholders' equity ...
*
Treasury stock
A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market ("open market" including insiders' holdings).
Stock repurchases are used as a tax efficien ...
References
Capital management
{{Econ-stub