Legal Definitions - paid-in surplus

Definition: Paid-in surplus is the extra money a company receives when it sells its stock for more than its par value. It is also known as capital surplus or premium on capital stock.

Examples:

• A company sells 100 shares of stock for $50 each, even though the par value of the stock is only $10. The company receives $4,000 ($50 x 100 shares) for the stock, but only $1,000 ($10 x 100 shares) is recorded as common stock. The remaining $3,000 is recorded as paid-in surplus.
• A company issues new shares of stock at a premium price to raise additional capital. The difference between the premium price and the par value of the stock is recorded as paid-in surplus.

These examples illustrate how paid-in surplus is created when a company sells its stock for more than its par value. This extra money is recorded as paid-in surplus on the company's balance sheet and can be used for various purposes, such as investing in new projects or paying off debt.