Additional Paid-In Capital

Additional paid-in-capital (APIC) represents capital received by a company when its shares are sold above their par value.

When a company issues shares, two entries in the shareholders’ equity section take place (Exhibit 6.21):

  1. Common stock (par value)

  2. APIC

Exhibit 6.21. Apic Represents Capital Received by a Company When its Shares are Sold Above Their Par Value
Source: Used with permission. Microsoft 2005 Annual Report.

Suppose a company issues 1 million shares with par value of $0.10 per share for net proceeds of $20 million. What is the impact on the financial statements?

  1. Common stock total value: 1 million shares × $0.10/share = $100,000

  2. APIC: $20 million – $100,000 = $19.9 million

  3. Cash: $20 million

 DebitCredit
Cash$20 million 
Common stock $0.1 million
APIC $19.9 million

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