Paid-in surplus definition
/What is a Paid-In Surplus?
A paid-in surplus is the incremental amount paid by an investor for a company's shares that exceeds the par value of the shares. If there is no par value, then the entire amount paid is classified as paid-in surplus. This amount is recorded in a separate equity account, which appears in the balance sheet of the issuer. The concept only applies to shares bought directly from the issuer, and not to shares traded between investors.
Example of Paid-In Surplus
An investor purchases one share of common stock from Munster Corporation for $100. The par value of this share is $1. When recording the sale, Munster’s accountant records $1 in the Common Stock account, and $99 in the Paid-In Surplus account.
Terms Similar to Paid-In Surplus
The paid-in surplus is also known as additional paid-in capital.