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What is the difference between paid-in capital and retained earnings?

Author:
Harold Averkamp, CPA, MBA

Definition of Paid-in Capital

Paid-in capital is one of the major categories of stockholders’ equity. Generally, paid-in capital reports the amount that a corporation received from its stockholders (or shareholders) in exchange for the newly issued shares of its capital stock.

Paid-in capital is also referred to as contributed capital and as permanent capital.

Definition of Retained Earnings

Generally, retained earnings is the cumulative amount of after-tax net income earned by the corporation since its inception minus the dividends that have been distributed to its stockholders since the corporation began.

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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 AccountingCoach.com.

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