What is capital in excess of par?
Sunday, January 9, 2011 at 5:07PM Capital in excess of par is the amount paid by investors to a company for its stock, in excess of the par value of the stock.
Par value is the legal capital per share, and is usually printed on the face of the stock certificate. Since par value is usually a very small amount per share, such as $0.01, most of the amount paid by investors is usually categorized as capital in excess of par.
The amount of capital in excess of par is recorded in the Additional Paid-In Capital account, and has a credit balance. For example, if ABC Company sell 100,000 shares of its common stock for $5 per share, and the par value of each share is $0.01, then the amount of the capital in excess of par is $499,000 (100,000 shares x $4.99/share), and is recorded as follows:
| Debit | Credit | |
| Cash | 500,000 | |
| Common stock | 1,000 | |
| Additional Paid-In Capital |
499,000 |
Related Topics
What is no par value stock?
What is paid in capital?
What is par value?
What is the premium on common stock?
Why are shares issued at a premium?
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