Paid in capital in excess of par là gì năm 2024

Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. He is the sole author of all the materials on Read more about the author.

Capital in Excess of Par, also known as Paid-in Capital in Excess of Par or Additional Paid-in Capital (APIC), is an equity account on a company’s balance sheet that represents the amount of money received from the issuance of shares above their par value. Par value, also called face value or nominal value, is a nominal amount assigned to a share of stock by the company when it is issued, and it is typically set at a minimal value (e.g., $0.01 or $1.00 per share).

When a company issues shares of stock to raise capital, it is common for the shares to be sold at a price higher than the par value. The difference between the actual price at which the shares are sold and the par value of the shares is recorded as Capital in Excess of Par.

Example of Capital in Excess of Par

Let’s consider a fictional example of a tech startup called “InnovateTech Inc.”

InnovateTech decides to raise capital by issuing shares of common stock to fund its growth and development. The company plans to issue 50,000 shares with a par value of $0.01 per share. After attracting investors, InnovateTech successfully sells the shares at a price of $20.00 per share.

Now, let’s calculate the Capital in Excess of Par for InnovateTech’s stock issuance:

  • Number of Shares Issued: 50,000 shares
  • Par Value per Share: $0.01
  • Issue Price per Share: $20.00
  • Apply the Capital in Excess of Par formula: Capital in Excess of Par = (Issue Price per Share – Par Value per Share) x Number of Shares Issued

Capital in Excess of Par = ($20.00 – $0.01) x 50,000 shares = $19.99 x 50,000 shares = $999,500

In this example, InnovateTech’s Capital in Excess of Par would be recorded as $999,500 on the company’s balance sheet. This amount represents the additional capital InnovateTech raised from investors beyond the nominal par value of the shares. It is part of the company’s total shareholders’ equity and can be used to fund its growth, research and development, or other business needs.

Shareholders' Equity is the excess of total assets after deducting the total liabilities. It is composed normally of common stock, preferred stock and retained earnings.

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Paid in capital in excess of par arises due to issuance of stocks. Shares of stocks has a minimal value indicated in its face which is called the par...

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Paid in capital in excess of par là gì năm 2024

The Components of Stockholder Equity


Chapter 11 / Lesson 4

Stockholder equity refers to the monetary value of a company to those who have stock in it. Study the definition and the components of stockholder equity, and the stockholder's equity statement.

Additional paid-in capital (APIC) is an accounting term referring to money an investor pays above and beyond the par value price of a stock.

Often referred to as "contributed capital in excess of par,” APIC occurs when an investor buys newly-issued shares directly from a company during its initial public offering (IPO) stage. APIC, which is itemized under the shareholder equity (SE) section of a balance sheet, is viewed as a profit opportunity for companies as it results in them receiving excess cash from stockholders.

Key Takeaways

  • Additional paid-in capital (APIC) is the difference between the par value of a stock and the price that investors actually pay for it.
  • To be the "additional" part of paid-in capital, an investor must buy the stock directly from the company during its IPO.
  • The APIC is usually booked as shareholders' equity on the balance sheet.
  • However, the cash generated from the sale of stock (both the par value and APIC) is recorded in the asset section of the balance sheet.
  • APIC is a great way for companies to generate cash without having to give any collateral in return.

Investopedia / Zoe Hansen

How Additional Paid-in Capital (APIC) Works

During its IPO, a firm is entitled to set any price for its stock that it sees fit. Meanwhile, investors may elect to pay any amount above this declared par value of a share price, which generates the APIC. This APIC is also known as contributed surplus.

Let us assume that during its IPO phase, the XYZ Widget Company issues one million shares of stock with a par value of $1 per share and that investors bid on shares for $2, $4, and $10 above the par value. Let us further assume that those shares ultimately sell for $11, consequently making the company $11 million. In this instance, the APIC is $10 million ($11 million minus the par value of $1 million). Therefore, the company’s balance sheet itemizes $1 million as "paid-in capital" and $10 million as "additional paid-in capital."

Once a stock trades in the secondary market, an investor may pay whatever the market will bear. When investors buy shares directly from a given company, that corporation receives and retains the funds as paid-in capital. But after that time, when investors buy shares in the open market, the generated funds go directly into the pockets of the investors selling off their positions.

APIC is recorded at the initial public offering (IPO) only; the transactions that occur after the IPO do not increase the APIC account.

Special Considerations

APIC is generally booked in the SE section of the balance sheet. When a company issues stock, there are two entries that take place in the equity section: common stock and APIC. The total cash generated by the IPO is recorded as a debit and the common stock and APIC are recorded as credits. Note that the cash recorded is reported in the asset section of the balance sheet, while common stock and APIC are reported in the equity section of the balance sheet.

The APIC formula is:

APIC = (Issue Price – Par Value) x Number of Shares Acquired by Investors

Par Value

Due to the fact that APIC represents money paid to the company above the par value of a security, it is essential to understand what par actually means. Simply put, “par” signifies the value a company assigns to stock at the time of its IPO, before there is even a market for the security. Issuers traditionally set stock par values deliberately low—in some cases as little as a penny per share—in order to preemptively avoid any potential legal liability, which might occur if the stock dips below its par value.

Market Value

Market value is the actual price a financial instrument is worth at any given time. The stock market determines the real value of a stock, which shifts continuously as shares are bought and sold throughout the trading day. Thus, investors make money on the changing value of a stock over time, based on company performance and investor sentiment.

Additional Paid-in Capital vs. Paid-in Capital

Paid-in capital, or contributed capital, is the full amount of cash or other assets that shareholders have given a company in exchange for stock. Paid-in capital includes the par value of both common and preferred stock plus any amount paid in excess.

Additional paid-in capital, as the name implies, includes only the amount paid in excess of the par value of stock issued during a company's IPO.

Both of these items are included next to one another in the SE section of the balance sheet.

Benefits of Additional Paid-in Capital

For common stock, paid-in capital consists of a stock's par value and APIC, the latter of which may provide a substantial portion of a company's equity capital, before retained earnings begin to accumulate. This capital provides a layer of defense against potential losses, in the event that retained earnings begin to show a deficit.

Another huge advantage for a company issuing shares is that it does not raise the fixed cost of the company. The company doesn't have to make any payment to the investor; even dividends are not required. Furthermore, investors do not have any claim on the company's existing assets.

After issuing stock to shareholders, the company is free to use the funds generated any way it chooses, whether that means paying off loans, purchasing an asset, or any other action that may benefit the company.

Why Is Additional Paid-in Capital Useful?

APIC is a great way for companies to generate cash without having to give any collateral in return. Furthermore, purchasing shares at a company's IPO can be incredibly profitable for some 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 refers to the money an investor pays above the par value price of a stock. The total cash generated from APIC is classified as a debit to the asset section of the balance sheet, with the corresponding credits for APIC and regular paid in capital located in the equity section.

How Do You Calculate Additional Paid-in Capital?

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

How Does Paid-in Capital Increase or Decrease?

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

The Bottom Line

Additional Paid-in Capital represents the amount of money investors contribute to a company above the stated par value of its stock. It is the equity portion of a company's balance sheet that includes funds received from issuing stock at a premium. This capital reflects the difference between the issue price of the shares and their par value, allowing companies to generate additional funds for expansion, research, or other business activities.

Correction—May 13, 2023: A previous version of this article incorrectly stated cash is recorded to the equity section of the balance sheet as opposed to the asset section.

Par value of stock là gì?

Par value là mệnh giá hoặc còn được gọi là giá trị danh nghĩa. Đây là giá trị mà công ty hoặc doanh nghiệp ấn định cho chứng khoán họ phát hành.

Nó par common stock là gì?

Định nghĩa Cổ phiếu không mệnh giá là loại cổ phiếu không ghi giá trị trên bề, tất nhiên không đồng nghĩa với việc nó không có giá trị gì. Đối với cổ phiếu này, chỉ tồn tại khái niệm thị giá - tức là giá cả của loại cổ phiếu này trên thị trường do cung và cầu quyết định.