What is capital surplus?

Definition of Capital Surplus

In the past, capital surplus was used to describe what is now referred to as paid-in capital in excess of par or Premium on Common Stock.

Example of Capital Surplus

Today, if a corporation issues shares of its common stock and receives more than its par value, two accounts are involved:

  • The account Common Stock is used to record the par value of the shares being issued
  • The account Paid-in Capital in Excess of Par—Common Stock, or Premium on Common Stock is used to record the amount that is greater than the par value

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