Paid in capital in excess of par

Paid-in Capital in Excess of Par

The amount investors pay for stock above its par or stated value, also called additional paid-in capital or share premium.

For example, if a corporation issues 50,000 shares with a par value of $1 at an issue price of $20 per share, it would record $50,000 as common stock and $950,000 as paid-in capital in excess of par.

This account represents the premium investors are willing to pay above the nominal value of shares, reflecting their assessment of the company’s future prospects. It provides capital for business operations without creating debt obligations and appears in the shareholders’ equity section of the balance sheet as part of contributed capital.