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