- Learn Basic Accounting in Less than 1 Hour!
- Accounting Basics
- What are Accounting Principles
- Accounting Cycle
- Accrual Accounting Basis
- Cash Basis Accounting
- Matching Principle of Accounting
- Conservatism Principle of Accounting
- Cash Accounting
- What are Accounting Policies?
- Accounting Estimates
- Mark to Market Accounting
- Cash Accounting vs Accrual Accounting
- Operating Cycle
- Fiscal Year
- Fiscal Year vs Calendar Year | Top Differences | Examples |
- Financial Reporting
- Financial Statements
- Interim Financial Statements
- Consolidated Financial Statement
- Audited Financial Statements
- Accounting Scandals
- Quality of Earnings
- IFRS vs US GAAP
- IFRS vs Indian GAAP
- Accounting for Fair Value Hedges
- Debit vs Credit in Accounting
- Double Entry Accounting System
- Journal in Accounting
- Ledger in Accounting
- Journal vs Ledger
- What is Trial Balance ? | Examples | Steps | Prepare | Errors
- Reconciliation of Books | Types, Best Practices | Useful Tips
- Petty Cash | Meaning | Template | Accounting | Example
- Debit Note | Debit Notes Accounting & its Top Characteristics
- Credit Note
- Debit Note vs Credit Note | Top 7 Differences (Infographics)
- Balance Sheet
- Balance Sheet
- Accounting Equation
- Assets vs Liabilities | Top 9 Differences (with Infographics)
- Trial Balance vs Balance Sheet | Top 10 Differences You Must Know!
- Balance Sheet vs Consolidated Balance Sheet
- Bank vs Company Balance Sheet
- Commitments and Contingencies
- Management Discussion & Analysis
- Revenue Reserve vs Capital Reserve | Top 7 Differences
- Revenue Reserve
- Capital Reserve
- Capital Receipts vs Revenue Receipts | Top 8 Differences
- Capital Lease vs Operating Lease | Top Differences You Must Know!
- Debt vs Equity Financing | Advantages | Disadvantages | Example
- Internal vs External Financing | Top 7 Differences (Infographics)
- Available for Sale for securities
- Held to Maturity to securities
- Cash and Cash Equivalents | Examples, List & Top Differences
- Cash Equivalents
- Restricted Cash
- 3 Types of Inventory | Raw Material | WIP | Finished Goods
- Current Assets
- FIFO vs LIFO
- First In First Out (FIFO)
- Last in First Out (LIFO)
- LIFO Reserve
- Non-Current Assets
- Accounts Receivables? | Definition, Accounting Examples
- Accounts Receivables Factoring
- Allowance for Doubtful Accounts
- Accrued Revenue
- Liquid Assets
- Quick Assets
- Marketable Securities on the Balance Sheet | Top Examples
- Trading Securities in Balance Sheet
- Prepaid Expenses
- Tangible vs Intangible Assets
- Net Tangible Assets | Calculate Net Tangible Assets Per Share
- Tangible Assets
- Capital Expenditure (Capex)
- Salvage Value
- Residual Value
- Fixed Capital vs Working Capital | Top 8 Differences (Infographics)
- Impariment of Assets
- Negative Goodwill
- Accounts Payable | Days Payable Outstanding | Formula |
- Current Liabilities | List of Current Liabilities on Balance Sheet
- Accrued Liabilities
- Notes Payable
- Revolving Credit Facilities
- Bonds Payable Accounting
- Bad Debt Reserve Allowance
- Deferred Expenses
- Unearned Revenue (Sales)
- Deferred Revenue (Income)
- Current Portion of Long-Term Debt (CPLTD) | Balance Sheet
- Long-Term Debt in Balance Sheet
- Financial Liabilities | Definition, Types, Ratios, Examples
- Long-Term Liabilities
- Accounts Receivable vs Accounts Payable
- Minority Interest
- Accounting for Convertibles
- Accounting for Derivatives
- Financial Lease vs Operating Lease
- Off balance Sheet Financing
- Finance vs Lease
- Shareholders Equity
- Shareholders Equity Statement
- Negative Shareholders Equity
- Par Value of Stock
- Share Capital
- Outstanding Shares (Definition, Formula) | Stocks Outstanding
- Additional Paid-in Capital on Balance Sheet
- Retained Earnings (Formula, Examples) | How to Calculate?
- How to Calculate Net Worth of a Company | Formula | Top Examples
- Owners Equity
- Preferred Shares
- Weighted average Shares average outstanding
- Share Buyback
- Accelerated Share Repurchase
- Restricted Stocks Units (RSUs)
- Contingent Shares
- Stock Splits Share
- Treasury Stock Shares
- Dilutive Securities
- Anti Dilutive Securities
- Stock Dividend
- Cash Dividend
- Preferred Dividends
- Homemade Dividends
- Ex dividend date
- Date of Record of dividends
- Cost of preferred Stock
- Common Stock vs Preferred Stock | Top 8 Differences You Must Know
- Stocks Vs Shares
- Stock Options Vs RSU
- Shareholder Equity vs Net Worth | Top 5 Differences You Must Know!
- Stock vs Option
- Stock vs Mutual Funds
- Income Statement
- Income Statement | Top Examples | Template | Format | Analysis
- Cost of Goods Sold
- Direct Costs
- Indirect Costs
- Non Recurring Items
- EBIT vs EBITDA | Top Differences | Examples | Calculation
- Depreciation – Formula | Types | Most Comprehensive Guide
- EBITDA vs Operating Income
- Straight Line Depreciation Method
- Sum of Year Digits Method of Depreciation
- Declining Balance Method of Depreciation
- Amortization of Intangible Assets
- Unrealized Gains (Losses)
- Non Cash Expense
- Share based compensation
- Restructuring Cost
- Extraordinary Items
- Interest Income
- Double Taxation
- Net Loss
- Net Operating Loss (NOL)
- Tax Shield
- Sundry Expenses
- Interest vs Dividend | Top 9 Differences (with Infographics)
- EBITDA vs Net Income
- EBIT vs Net Income
- EBIT vs Operating Income
- Cost vs Expense
- Accounting Profit vs Economic Profit
- Income Tax vs Payroll Tax
- Tax credits vs Tax deductions
- Gross Income vs Net Income
- Profit vs Revenue
- Revenue vs Earnings
- Revenue vs Income
- Profit vs Income
- Revenue vs Sales
- Capitalization vs Expensing
- Income Statement vs Balance Sheet | Top 5 Differences You Must Know!
- Statement of Comprehensive Income | Items | Colgate Example
- FOB Destination
- Explicit Cost
- Implicit Cost
- Direct cost vs Indirect Cost
- Fixed cost vs Variable cost
- Nopat vs Net Income
- Marginal Costing vs Absorption Costing
- Cash Flow Statement
- Cash flow from Operations | Formula, Calculations & Examples
- Cash Flow from Investing Activities (Formula & Top Examples)
- Cash Flow From Financing Activities | Formula & Calculations
- Cash Flow Analysis
- Fund Flow Statement
- Direct vs Indirect Cash Flow Methods
- Cash flow vs Net Income | Key Differences & Top Examples
- Cash Flow vs Fund Flow | Top 8 Differences (with Infographics)
- Accounting Careers
- Accounting Interview Questions
- Financial Accounting Careers
- Top Accounting Firms
- Big Four Accounting Firms
- Forensic Accounting
- Cost Accounting
- Financial Accounting
- Accounting vs Engineering
- Finance vs Accounting
- Bookkeeping vs Accounting
- Accounting vs Auditing
- Bookkeepers vs Accountants
- Accounting vs Financial Management
- Cost Accounting vs Financial Accounting
- Cost Accounting vs Management Accounting
- Financial Accounting vs Management Accounting
- Public vs Private Accounting
- Accounting vs CPA
- Controller vs Comptroller
- Accounting Firms in Australia
- Accounting Firms in Canada
- Top Accounting Firms in US
- Accounting Books
source: Colgate SEC Filings
What is Additional Paid-in Capital on Balance Sheet?
Additional paid-in capital (APIC) is the amount that is the excess of par value and is listed on the balance sheet. If we deduct par value from the issue price, we will get additional paid-in capital.
Par value of stock is the minimum amount that must be paid to own a share. It means that to acquire a share, this base amount has to be paid.
- For example, if a share is issued at $50 per share and its par value is $5 per share; we will conclude that $5 per share is the minimum amount that must be paid to acquire the share. This base amount is also called the legal capital of the company.
- Here the APIC comes in. Since each investor of the company pays the whole amount (i.e. the issue price) to acquire one share, anything above par value is APIC.
- Therefore, Additional Paid-in Capital Formula = (Issue Price – Par Value) x number of shares issued
- If 100 shares are issued, then, Additional Paid-in capital formula = ($50 – $5) x 100 = $4,500
There’s another thing you need to consider while calculating additional paid-in capital. If the shares are purchased from the company (during IPO or FPO etc), directly, there would be APIC above par value. However, if the shares are purchased from the secondary market, it would not affect the APIC of the company at all.
Also, have a look at this detailed guide on Share Capital
Additional Paid-in Capital Example
Let’s take an example to understand APIC on balance sheet better.
Let’s say that Company Infinite Inc. has issued equity shares of 10,000 at $50 per share. The par value of each share is $1 per share. Find out the APIC.
This is an easy to understand example that can illustrate how to approach additional paid-in capital on balance sheet.
Infinite Inc. has issued 10,000 equity shares at $50. That means the total equity capital would be = (10,000 * $10) = $500,000.
- The catch is par value per share is just $1. That means we need to attribute the respective amount to par value (stock). Here the par value would be = (10,000 * 1) = $10,000.
- And the rest would be additional paid-in capital on balance sheet as it is over and above the par value. That means the additional paid-in capital formula = ($50 – $1)/share = $49 per share. Then, the total APIC would be = (10,000 * $49) = $490,000.
WallStreetMojo Free Accounting Course
You will Learn Basics of Accounting in Just 1 Hour, Guaranteed!
* Please provide your correct email id. Login details for this Free course will be emailed to you
Additional paid-in capital Accounting Entries
How would we pass the accounting entry for additional paid-in capital on balance sheet?
First of all, we need to think about the legal capital, i.e. par value (stock) amount. Since that’s the legal capital, we will attribute the amount to the common stock account. The rest of the amount (issue price – par value per share) would be attributed to APIC .
So, the entry would be –
- Cash account would be debited since cash is an asset and by receiving the whole amount (total equity capital), the company’s asset cash is increasing.
- We would credit the common stock account and the APIC account in their respective proportion.
Additional Paid-in Capital Accounting Entry Example
Let’s say that Company Eight Nest Ltd. has the following information.
Eight Nest Ltd. has issued 10,000 shares at $50 per share. They’ve kept the par value (stock) as $5 per share. We need to pass the accounting entry for additional paid-in capital on balance sheet.
- Here, we know that the issued number of equity shares is 10,000 and the issue price per share is $50. That means the total equity capital is = (10,000 * $50) = $500,000.
- The par value is also mentioned i.e. $5 per share. That means, the total amount of par value is = (10,000 * $5) = $50,000.
- The rest amount would be attributed to APIC. The total APIC would be = [10,000 * ($50 – $5)] = [10,000 * $45] = $450,000.
Now, we will pass the accounting entry –
Cash A/C…….Dr $500,000 –
To Common Stock A/C – $50,000
To APIC A/C – $450,000
Reasons for Changes in Additional paid-in Capital on Balance Sheet
Please see below the snapshot of Additional Paid-in Capital on Balance Sheet. We note that APIC has been changing each year.
We note that the changes in APIC of Colgate is due to three reasons.
- Share-based compensation expense of $127 million
- Shares issued for stock options of $197 million
- Share issued for restricted stock awards
Share-based compensation expense is reported in the income statement. This results in the lowering the net income, thereby reducing the shareholder’s equity through the retained earnings section. The contra entry for this is by increasing the additional paid-up capital.
Additional paid-in capital on Balance Sheet has nothing to do with the market price per share. It is completely dependent on the issue price. If an investor purchases shares from the company and sells off to another investor at a higher price, it would not affect the capital of the company.
This has been a guide to what is Additional Paid-in capital on Balance Sheet? Here we discuss its examples, formula, accounting entries and reasons for changes over the years. You may also go through the following recommended posts on basic accounting –