Paid in Capital

Definition

The financial accounting term paid in capital is used to describe the value of the assets invested in the company by stockholders.  Paid in capital is found in the owner's equity section of the balance sheet.

Calculation

Paid in Capital = Par Value of Stock + Additional Paid in Capital

Explanation

Paid in capital are investments in cash, or other assets in a company, that are exchanged for shares of capital stock.  The total value of capital raised is sometimes reported on the balance sheet as both the par value of the stock issued as well as the paid in capital that was in excess of par (additional paid in capital).  Since the par value of stock is often very small, these two categories are often combined.

Paid in capital is the value of the assets invested in the company by the stockholders.  This is different than the concept of earned capital, or retained earnings, which are not part of paid in capital.  Generally, these initial capital investments by stockholders are never withdrawn from the company, and are considered a permanent source of funding.

Related Terms

balance sheet, owner's equity, par value, retained earnings, sources of equity