Additional paid-in capital (APIC) - Financial definition
Financial acronyms
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Concise definition of the term additional paid-in capital
The term additional paid-in capital describes the part of the payment received from investors, during an IPO or a capital raise, which exceeds the par value of the stocks.
Comprehensive definition of the term additional paid-in capital
Additional paid-in capital is booked into an account of the same name, while the amount corresponding to the shares' par value is booked to the common stock account.
The additional paid-in capital is not impacted by transactions in the share on the secondary market, as the issuing company is not involved in these transactions.
Example
Let us say that a company issues 50,000 shares with a par value of 10 USD each. During the IPO, the shares are then sold to investors for a total of 1,275,000 USD.
The company's books will show a $1,275,000 balance in the cash account (debit), a 500,000 USD balance in the common stock account (credit) and a 775,000 USD balance in the additional paid-in-capital account (credit).