Additional Paid-In Capital (APIC)

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on August 26, 2021

What Is Additional Paid-In Capital (APIC)? – Definition

Additional Paid-in Capital (APIC) is the amount invested in a corporation by its owners, in addition to the par value of any capital stock.
Stockholders may have claims against the corporation arising from payments into the company from events other than operations or the issuance of stock. While the most precise approach would identify the specific origin of the claims, immateriality usually results in their being grouped into a single Additional Paid-In Capital or Capital in Excess of par account. The paragraphs below describe several examples of events that create this type of claim.

Defaulted Subscriptions

In the event that a subscriber to stock fails to pay in the full amount promised and the corporation is allowed to keep some or all of the cash paid in prior to the default, additional paid-in capital is created to the extent of the unrefunded amount. Refer to the Sample Company situation and assume further that a subscriber to 10,000 shares defaults on May 1.
Additional paid in capital Defaulted Subscription journal entry
If 90,000 shares are issued to the paid-up subscribers, this entry would be made:
Defaulted Subscription journal entry
At this point, account associated with the default have these balances:
Defaulted Subscription
Further, the corporation has accepted $150,000 of the subscriber’s cash. If the full amount is refunded on May 15, this entry would be made:
Defaulted Subscription journal entry
A much more likely situation would call for the corporation to keep part of the cash in order to recover its costs. Suppose that Sample Company is allowed by the agreement to keep 30 percent of the cash; this entry would be made when the defaulted subscriber is refunded $105,000, or 70 percent of the $150,000 paid in:
Defaulted Subscription journal entry
The $45,000 (30 percent of $150,000) of additional paid-in capital represents claims held by the nondefaulting stockholders.

Donated Assets

A firm may accept a donated asset from a local government agency. The most common practice for recognizing the increase in stockholders’ equity calls for a credit to Additional Paid In Capital. If the Sample Company accepts a plot of land worth $850,000 as a donation, this entry would be made:
Donated assets journal entry
If the amount of capital created by this action is material, a more descriptive title might be used, such as Paid-In-Capital—Donated Assets, and the account balance would be separately disclosed. Whatever it is called, the account describes the claims held by the stockholders that arose from the acceptance of the assets.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.

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