Share Capital, otherwise known as equity financing, refers to the amount of money and property that a company has received in exchange for shares of the company. The shares can be either ordinary or preferred.
Share Capital is listed in the balance sheet of the company as:
1) Common or preferred shares par value
2) Additional Paid-Up Capital
Share Capital on the balance sheet reflects the total amount of all the company’s share sales. This figure differs from the market value. For example, XYZ Pte Ltd sells 100 shares at $10 each with a Par Value of $1 and Additional Paid-Up Capital of $9. This raises $1,000 from shareholders. These shareholders sell these 100 shares in the secondary market for $5,000 or $50 per share. The Share Capital on the balance sheet will remain at $1,000.
Additional knowledge:
Authorised Share Capital is the total par value of all the shares that a company is allowed to sell. For example, if the par value of a share is $1 and the Authorised Share Capital is $1,000,000, the company can sell 1,000,000 shares.
Issued Share Capital is the total value of shares that it chooses to sell. The par value of the Issued Shares cannot exceed the Authorised Share Capital. Not all issued shares are sold straight away.
Paid Share Capital refers to the total value of the shares that the company sells. Paid Share Capital is equal or less than Issued Share Capital.
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