How to Calculate Additional Paid-In Capital in Accounting

by Matthew Schieltz, studioD

For accounting purposes, the additional paid-in capital -- sometimes termed "capital surplus" -- equals the amount of money investors paid over a nominal "par value" to acquire shares of stock. Corporations usually report both these figures on their Balance Sheet. Added together, the par value and additional paid-in capital equal the total amount of money a corporation has received through its sale of stock. This amount is generally not available for dividends and can be useful when comparing it to a company's retained earnings, also listed on the Balance Sheet.

Locate the par value of the company's stock. The par value generally has no connection to the market value of stock. It's an arbitrary value -- usually low (e.g., 20 cents, $1.00) -- set by the company at the time of stock issuance, often a legal requirement and sometimes referred to as the stock's "stated" value. Look on stock certificates, in the stock's issuing documents, corporate charters or annual reports to find the company stock's par value.

Find the number of shares of stock issued by the company and the issue price of each stock. Read the company's IPO (initial public offering) documents filed with the Securities and Exchange Commission, press releases or news articles to find this data. Companies typically report the number of shares issued in the Shareholders' Equity section of the company's Balance Sheet.

Subtract the stated par value from the issue price of each stock. For instance, subtract $0.20 from $45 for one share of stock to arrive at $44.80.

Multiply the result by the number of shares the company issued to calculate the additional paid-in capital amount. For example, multiplying $44.80 by 2 million shares equals $89,600,000 in additional paid-in capital.

About the Author

Matthew Schieltz has been a freelance web writer since August 2006, and has experience writing a variety of informational articles, how-to guides, website and e-book content for organizations such as Demand Studios. Schieltz holds a Bachelor of Arts in psychology from Wright State University in Dayton, Ohio. He plans to pursue graduate school in clinical psychology.

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