How to Calculate Contributed Capital

Contributed Capital

Contributed capital also known as Paid-in capital. It is the amount of cash and assets that shareholders have contributed to a company. Paid-in capital is reported in the shareholder’s equity section of the company’s balance sheet and does not include shares traded on the open market. In addition, contributed capital does not include shares purchased in the secondary market and sold during a secondary offering. Here are some ways to calculate your contributed capital.

Paid-in capital is the amount of cash and other assets that shareholders have given to a company

Paid-in capital is the total cash and assets that shareholders have contributed to a company in return for stock. This amount includes the par value of each share and any excess paid by investors. Paid-in capital is recorded on a balance sheet under the section of shareholders’ equity. It may be recorded as its own line item or listed next to Additional Paid-in Capital. Listed amounts may also include par value of the shares.

In the following table, the cash and other assets that Acme Manufacturing, Inc. has contributed are broken down by type. Its current assets are Accounts Receivable, Inventory, and Cash & Cash Equivalents. Its current liabilities are debts that are due within a year. On the other hand, its long-term liabilities include mortgages, bonds, and accounts receivables.

A publicly traded company is considered “initial” capital. Its shares have a value of $100 and have a market capitalization of $5 billion. However, the amount of shares is too high to be affordable to the average investor. So, the company will split the shares in order to provide more value to shareholders. The value of the newly-merged company will be $1.7 billion.

Contributed Capital is reported in the shareholder’s equity section of the balance sheet

The value of contributed capital is included in the company’s stockholders’ equity on the balance sheet. It will be separated into two accounts: common stock and additional paid-in capital (APIC). The common stock account contains the value of contributed capital representing the par value of the stock. The additional paid-in capital account includes the amount over par value. When calculating it’s value, the amount above par value is deducted from the total.

The shareholders’ equity section of the balance sheet shows a company’s equity, which is divided into two categories: contributed capital and earned capital. Contributed capital consists of money invested by stockholders in the company, while earned capital is total net income, including dividends paid out. Many accountants refer to equity as residual interest because stockholders own an interest in the company, whereas equity is a legal claim on its assets.

A company’s contributed capital section shows the value of all stock purchased by its shareholders, as well as the price paid for it. In some cases, contributed capital is split between two accounts: Common Stock and Additional Paid-In Capital. Common Stock represents the par value of shares issued by the company; the additional paid-in capital accounts for the excess amount paid to investors. It is reported in the shareholder’s equity section of the balance sheet in two separate accounts.