Course Outline
Join PRO

Is contributed capital a noncurrent asset or a current asset, and is it a debit or credit?

Harold Averkamp, CPA, MBA

Definition of Contributed Capital

Contributed capital is one of the major components of a corporation’s stockholders’ equity. Contributed capital is often described as paid-in capital and as corporation’s permanent capital.

Typically, a corporation issues shares of its common stock and receives cash for the stock’s fair market value. The transaction will be recorded with a debit to the Cash account and a credit to one or two contributed capital accounts such as Common Stock (and perhaps Paid-in Capital in Excess of Par Value). If the corporation exchanges some of its shares of common stock for property, the fair market value of the stock or the property (whichever is more clear) is debited to the property account and credited to one or two contributed capital accounts.

Note that both the corporation’s assets increased and its stockholders’ equity (specifically the contributed capital) increased.

Example of Contributed Capital

Assume a corporation issued and sold 10,000 new shares of its common stock for $900,000. The money received by the corporation is debited to the current asset Cash and $900,000 is credited to a contributed capital account such as Common Stock.

Assume that two days later the corporation purchases real estate consisting of land and a warehouse/office building for $700,000. Assume that the land is appraised to be 1/7 of the real estate cost. After the real estate purchase, the corporation’s general ledger accounts will have a debit balance of $200,000 in the current asset account Cash, a debit balance of $100,000 in the noncurrent asset account Land, a debit balance of $600,000 in the noncurrent asset account Warehouse/Office Building, and a $900,000 credit balance in the contributed capital account Common Stock.

After several accounting periods, the amounts in the asset accounts will change from the depreciation of the building and from hundreds of other transactions. However, the amount in the Common Stock account will normally remain at $900,000.

Join PRO to Track Progress
Must-Watch Video

Advance Your Accounting and Bookkeeping Career

  • Perform better at your job
  • Get hired for a new position
  • Understand your small business
  • Pass your accounting class
Watch the Video

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,645 reviews



PRO Plus

Lifetime Access (One-Time Fee)
Word Scrambles
Bookkeeping Video Training
Financial Statements Video Training
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Payroll Accounting

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on

Learn More About Harold

Certificates of

Certificates of Achievement

We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping:

  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Payroll Accounting
Badges and Points
  • Work towards and earn 30 badges
  • Earn points as you work towards completing our course
View PRO Plus Features
Course Outline
Take the Tour Join Pro Upgrade to Pro Plus