Additional paid-in captial is the excess amount paid by investor over the common par value.
Additional paid-in capital is the amount contributed by investors in excess of the Common Par value of the company's stock, which can arise from either a preferred or common issuance of stock. Additional paid-in capital is calculated as:
Additional Paid In Capital = (Issue Price - Par Value) x Number of Shares Issued
Additional paid-in capital is recorded on a company's balance sheet in the contributed surplus account for the shareholder's equity section. That said, some companies will choose to separate additional paid in capital from contributed surplus on their balance sheets.
Examples
For example, if 1000 shares of $10 par value common stock is issued at a price of $12 per share, the additional paid-in capital is $2000 = 1000 shares x ($12-10).
