Understanding and Calculating Additional Paid-In Capital

For the sake of accounting, stock is given a value before it is sold on the market. That value is referred to as par value. However, the stock is often sold to investors at an amount great than par value. The excess that is paid to the company by the investor -- that is, the amount over par -- is referred to as "additional paid-in capital" and can be found on the balance sheet. You can also calculate it yourself.

Step 1

Determine the par value of stock sold. Suppose the par value of stock is $60 per share.

Step 2

Determine how many shares of stock the company has issued. Suppose the company issued 1,000,000 shares of stock.

Step 3

Determine at which price the stock was sold to investors. Suppose the selling price for shares of stock is $80.

Step 4

Calculate the additional paid-in capital. Subtract the par value of the shares from the capital received from the sale of shares to investors. In our example, the calculation is this: $80 million - $60 million = $20 million. The additional paid in capital in $20 million.