What is paid in capital?

Paid in capital is the payments received from investors in exchange for an entity's stock. This stock can be either common stock or preferred stock.

Paid in capital is only comprised of funds received from the sale of stock; it does not include proceeds from company operations.

Paid in capital is somewhat different from the term additional paid-in capital, because paid in capital includes both the par value of stock sold and the additional paid-in capital representing the price at which stock is sold above the par value. Thus, the formula for paid in capital is:

Paid in capital = Par value + Additional paid in capital

An alternative meaning is that paid in capital equals additional paid in capital, so that par value is excluded from the definition. Thus, you need to be clear on the definition when discussing paid in capital with other people who may have a different concept of the term.

Similar Terms

Paid in capital is also known as contributed capital.

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