Paid in Capital can be defined as the fund that is raised by the business through shareholder equity and not from the other business operations such as sales and services. Paid in capital is comprised of the amount or cash that is paid by the investors while a company issues its common stock and the investors purchase the common stock or preferred stock of the company. The amount of paid in capital also includes the par value of the shares that are purchased by the investors.
In the balance sheet of the company the amount of the paid in capital is recorded under the stockholder equity account of the business. The entry of the stockholder equity of the business is shown along with the side of the entry of additional paid in capital of the company. Another name given to the paid in capital is also called contributed capital.
Most of the companies have two financial figures that are the paid in capital and the additional paid in capital. There is a significant difference between the two figures. The difference between the two figures is actually the premium that is additionally paid by the investors other than the par value of the purchased common or preferred stock. However the par value of the shares is very low these days and it is assumed that the preferred stock has more par values as compared to common stock. Due to lack of difference the additional paid in capital is sometimes termed as the representative of the paid in capital.
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