Share Capital vs. Additional Paid-in Capital

📖 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.

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🧾 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.

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⚙️ 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.

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🔢 FORMULAS

SHARE CAPITAL = Par Value × Number of Issued Shares

ADDITIONAL PAID-IN CAPITAL = (Issue Price – Par Value) × Number of Issued Shares

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💡 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.

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