Additional paid-in capital

Definition

Additional paid-in capital (APIC) represents the amount shareholders have invested in the company above the par value of the stock. It is recorded in the equity section of the balance sheet.

5 Must Know Facts For Your Next Test

1. APIC is calculated as the difference between the issue price and par value of shares multiplied by the number of shares issued.
2. It does not include amounts from retained earnings or common stock at par value.
3. APIC can increase through new stock issuances or exercises of stock options, and decrease through repurchases.
4. Recording APIC involves crediting the APIC account and debiting either cash or other assets received.
5. It provides insight into how much capital a company has raised from shareholders beyond what is legally required as par value.

Review Questions

• What does additional paid-in capital represent on a company's balance sheet?
• How is additional paid-in capital calculated?
• In which section of the balance sheet will you find additional paid-in capital?

Related terms

Common Stock:

Represents ownership in a corporation, typically with voting rights, and is recorded at par value.

Par Value:

A nominal dollar amount assigned to each share of stock that represents its minimum legal capital.

Retained Earnings:

Accumulated net income that has been retained for reinvestment in the business rather than distributed as dividends.