📖 DEFINITIONS
✦ SHARE CAPITAL
It refers to the funds a company raises by issuing shares to shareholders at their par or nominal value;
→ Share capital represents the base amount invested by shareholders directly into the company when purchasing shares at face value.
✦ ADDITIONAL PAID-IN CAPITAL
This is the amount shareholders invest in a company above the par value of shares;
→ APIC reflects the excess amount shareholders pay over the nominal value when buying shares, contributing additional equity beyond the base share capital.
_________________
🧾 PRESENTATION IN FINANCIAL STATEMENTS
✦ SHARE CAPITAL
Listed under the equity section of the balance sheet, representing the base investment from shareholders at the nominal price of shares;
→ It forms the foundation of the company’s equity but does not include any premium paid by investors above the par value.
✦ ADDITIONAL PAID-IN CAPITAL
→ It appears separately under the equity section in the balance sheet, alongside share capital;
→ It represents the premium paid by shareholders above the nominal value and provides a clearer picture of the total investment made by shareholders.
_________________
⚙️ COMPONENTS
✦ SHARE CAPITAL
→ Par Value: The nominal price or face value of each issued share;
→ Issued Shares: The total number of shares that have been sold to investors.
✦ ADDITIONAL PAID-IN CAPITAL
→ Share Premium: The amount paid by investors above the par value of shares;
→ Total Contribution: The total investment that includes both share capital and the excess payment recorded as APIC.
_________________
🔢 FORMULAS
SHARE CAPITAL = Par Value × Number of Issued Shares
ADDITIONAL PAID-IN CAPITAL = (Issue Price – Par Value) × Number of Issued Shares
_________________
💡 SUMMARY
✦ SHARE CAPITAL → Represents the base amount raised from issuing shares at their nominal value;
✦ ADDITIONAL PAID-IN CAPITAL → Reflects the extra amount shareholders pay above the par value, contributing additional equity;
✦ Share capital is the foundation of equity, while APIC adds to it by capturing the premium investors are willing to pay for shares.
_________________
FOLLOW US FOR MORE.
Comentários