Credit and Debit Cards
Business Accounting and Bookkeeping
Accounts Payable

In accounting when the term paid in capital account is used what does this mean?

User Avatar
Wiki User
August 21, 2007 4:27PM

A dictionary definition is given by

"Paid-in capital represents the amounts paid to the corporation in exchange for shares of the company's preferred and common stock."[1 (reference given below)] [2]

But what is the context? I am learning this myself and what i have encountered is a balance sheet entry. One should remember that generally balance sheet entries represent ACCOUNTS (i.e. they are accumulative). Thus for example if the year 2006 entry for paid-in capital is $1000 and the year 2005 entry is $900 then that means that $100 was paid in 2006 by someone for stock. (Actual story is a bit more complicated: The $100 represents part of the amount paid-in for stock, namely the part in excess of par value. )