Paid in Capital (APIC)

Paid in Capital (APIC)

See Also:
Common Stock Definition
Preferred Stocks (Preferred Share)
Treasury Stock (Repurchased Shares)
Owner’s Equity
Balance Sheet

Paid in Capital Definition

The paid in capital definition is the total amount paid on equity or stock over the par value of the stock. In addition, it is a balance sheet account in the stockholder’s equity section. This account simply represents the market value over the book value of the equity. It is also called the premium stock, premium on stock, or additional paid in capital (APIC).

[button link=”” bg_color=”#eb6500″]Download The 25 Ways to Improve Cash Flow[/button]

Paid in Capital Equation

The following paid in capital equation is simply put as the amount paid for the stock over the par value of the stock:

Amount Paid Common Stock – Par Value Common Stock = Additional Paid in Capital

Usually the amount paid for the stock is at the market value so the following formula can also be looked at:

Market Value Stock – Book (par) Value Stock = Additional Paid in Capital

Paid in Capital Example

For example, Yazoo inc. is looking to make a public offering in the market for $2 par value common stock in the amount of 100,000 shares. Thus, the book value of the common stock is $200,000. The investment bank believes that the company will be able to receive a price based on its current market value of stock at $20 per share. Yazoo is unsure that they can receive this price. So, they opt to sell the stock at $19 per share first to the investment bank allowing them to make the offering. They can now debit cash in the amount of $1.9 million. Yazoo will also credit common stock for $200,000 or the book value, and it will also credit the additional paid in capital (APIC) account for the remainder of $1.7 million.
[box]Note: If successful in supplying the market with the stock, then the investment bank will make a profit of $1 million dollars that Yazoo would not see. However, many companies perform this same maneuver to take the volatility of the market out of the equation allowing Yazoo to lock in a price for the financing that they will receive. This is where the term underwriting comes from when referring to investment banking. [/box]
If you want more tips on how to improve cash flow, then click here to access our 25 Ways to Improve Cash Flow whitepaper.

Paid in Capital Definition, Paid in Capital Equation, Paid in Capital
[box]Strategic CFO Lab Member Extra
Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]

Paid in Capital Definition, Paid in Capital Equation, Paid in Capital


Does your Accounting Department Produce Net Income?

Coaching the Entrepreneur: Learn how to know what you don’t know. How much should I spend on accounting for my company?     I have been in the accounting profession for 32 years, and for the last 6 years, I’ve owned my own consulting firm to assist companies with accounting challenges. There is one common theme that I

Read More »

Is Mexico the New China?

In the wake of the COVID-19 pandemic and escalating tensions with China, American companies are actively seeking alternatives to mitigate their supply chain risks and reduce dependence on Chinese manufacturing. Nearshoring, the process of relocating operations closer to home, has emerged as an explosive opportunity for American and Mexican companies to collaborate like never before.

Read More »


Financial Leadership Workshop

MARCH 28TH-31ST 2022


Financial Leadership Workshop


August 7-10th, 2023

WIKI CFO® - Browse hundreds of articles
Skip to content