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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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