The amount of capital that was”paid in” by investors in common or preferred stock issuances, which includes the par value of the shares as well as amounts in excess of par value, is referred to as paid-in capital(PIC). The stockholders are regarded as the company’s owners. Their funds are invested in the form of share capital and return, and they receive dividends.
Paid-in capital is the amount of money raised by a company by selling its stock rather than by operating the company. Paid-in capital is also a line item on the balance sheet under shareholders’ equity, which is frequently included with the line item for additional paid-in capital.
The company’s shares are always issued with a par value. It is set when a corporation first offers shares in an Initial Public Offering (IPO). It is the stock’s original cost as shown on the certificate. The par value and market value are not the same things. The cost of buying and selling a business on the open market determines its market value. The shares are always shown at their par value or face value on the balance sheet.
When an investor buys stock from a firm directly, the company receives the money as contributed capital. When buyers purchase shares on the open market, the amount of shares purchased is directly paid to the investor selling the shares. Paid in share capital is a fund raised by the firm through the sale of its equity shares, rather than an income created by the company through its daily operations.