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Capital surplus, also called share premium, is an account which may appear on a corporation's balance sheet, as a component of shareholders' equity, which represents the amount the corporation raises on the issue of shares in excess of their par value (nominal value) of the shares (common stock).
In accounting, the share capital of a corporation is the nominal value of issued shares (that is, the sum of their par values, sometimes indicated on share certificates).). If the allocation price of shares is greater than the par value, as in a rights issue, the shares are said to be sold at a premium (variously called share premium, additional paid-in capital or paid-in capital in excess of p
In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity.
Credit paid in capital – stock warrants. The fair value of the warrants on the grant date is determined from the market or the Black-Scholes model. Exercise of warrants; Debit cash. Debit paid in capital – stock warrants. Credit common stock – par value. Credit paid in capital – common stock in excess of par value.
Various types of equity can appear on a balance sheet, depending on the form and purpose of the business entity. Preferred stock, share capital (or capital stock) and capital surplus (or additional paid-in capital) reflect original contributions to the business from its investors or organizers.
Since the balance sheet is founded on the principles of the accounting equation, this equation can also be said to be responsible for estimating the net worth of an entire company. The fundamental components of the accounting equation include the calculation of both company holdings and company debts; thus, it allows owners to gauge the total ...
A stock certificate is a legal document that specifies the number of shares owned by the shareholder, and other specifics of the shares, such as the par value, if any, or the class of the shares. In the United Kingdom, Republic of Ireland, South Africa, and Australia, stock can also refer, less commonly, to all kinds of marketable securities. [4]
It is commonly called "treasury stock" or "equity reduction". That is, treasury stock is a contra account to shareholders' equity. One way of accounting for treasury stock is with the cost method. In this method, the paid-in capital account is reduced in the balance sheet when the treasury stock is bought.
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