Common Stock vs. Additional Paid-in Capital

This video shows the difference between Common Stock and Additional Paid-in Capital.
Common Stock and Additional Paid-in Capital are both Stockholders' Equity accounts that appear on the Balance Sheet, and they both represent capital given to the company in exchange for shares of stock.
Common Stock and Additional Paid-in Capital are two separate accounts, however, because Common Stock is money received for the stock's par value while Additional Paid-in Capital is any money received over and above the stock's par value. For example, if Twitter issues 1 share of stock with a par value of $2, and an investor gives Twitter $30 for that share of stock, then Twitter would record an increase of $2 to its Common Stock account and an increase of $28 to its Additional Paid-in Capital account. The combined effect would increase Twitter's Stockholders' Equity by $30.
Common Stock and Additional Paid-in Capital are sometimes lumped together and called "contributed capital."
Some companies issue common stock that has no par value. If Twitter issued 1 share of no-par stock for $30, it would simply increase Common Stock by $30. In that scenario, there would be no Additional Paid-in Capital.-
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[@malav308]

Finally !! This was the third video which I saw to understand the concept between Common Stock and Additional Paid-in Capital. Thank you for explaining the concept with such clarity.

[@user-bb3ci3gn7s]

I've never understood this....until now. Thank you so much!

[@a.c.n.9421]

Seriously....YOU'RE A LIFE SAVER!!!!

[@86ifyfarooq]

Very nice. I like the real life examples, like that of Twitter accounts.

[@Flashyfinancier]

Its not of twitter accounts. Its of the actual Twitter company

[@James-ip5gz]

Wow you have such a talent for teaching. You could teach this to a 3rd grader and they'd understand!

[@Edspira]

Wow, thank you!

[@daniela31991]

wow explained it PERFECTLY. I have zero questions

[@chrisneil7475]

Clear, concise. Thank you for making these videos.

[@Edspira]

Glad you like them!

[@deannapolt8740]

Thank you for an amazing explanation on this concept !

[@Edspira]

Thank you!

[@MyFinancialFocus]

It would probably be easier for them to start excluding par value from the balance sheet and just using a paid in capital/ common stock line item. This channel makes things easier to figure out though :)

[@htelzer123]

thank you soooooooooooooooo much. took me 2 hours to get to a vid that explained this well

[@matalynsantini2638]

Very helpful. Thanks.

[@Flashyfinancier]

Thank you Mike!

[@StevenChet]

Wow what a great video, thanks for helping me understand

[@ishmaelsassoon795]

why is the par value seen as a credit even though the firm is still receiving it

[@lahirulowe4752]

superb explanation!!!

[@CarlaLorente2]

this was so helpful! thank youu!!

[@federicozheng803]

THANK YOU SO MUCH, wish you were my ac prof

[@rutamyellapurkar7510]

Sir you said they will keep par value as low. But can't they issue stock split in future to reduce their par value?

[@aayushkhazanchi7770]

crystal clear explanation. Thankyou! :)

[@Edspira]

You're very welcome!

[@blixerblacking4211]

but people who bought those socks can sell them below the par value is that right?

[@flake8382]

1:47 I like this an all Michael... But why? Why can not a firm issue new stock, at a lower rate if the market rate deteriorates. It should be noted my experience with, and understanding of, EPS and Dilution are very primitive at this time.

[@natekennedy1668]

thank you!

[@VarunSingh-iu1eb]

I studied in one of the courses that contributed capital is equal to capital stock and treasury stock so then, Is capital stock = common stock and additional paid-in capital? If not then what does capital stock represents? Please clarify

[@Erez.Levi.Stocks]

First i will say, Amazing explanation Second: why not all the company decide on a same par value of 1$ and that`s it ? what are the difference between 1$ or 0.40$ or 0.00005$ ? In any case, investors pay far beyond that. thanks in advance

[@godschiId]

When a corporation liquidates its assets, the company's creditors are the first in line to receive funds from the liquidation. Bondholders and owners of other corporate debt securities are the next recipients to be paid. However, after these debts are paid, shareholders lay claim to liquidated assets. Preferred stock holders receive their payments before holders of common stock. And the par value represents the claim that they have so it can be a big difference in case of liquidation

[@Erez.Levi.Stocks]

@@godschiId Thank you very much

[@godschiId]

@@Erez.Levi.Stocks my pleasure

[@jarjarthestar]

Would the par value drop in the case of a stock split?

[@strongmind6584]

if i multiply 0.00005 value to the 5,000,000 common shared it only amounts to $25. How does it get to the 4,000 in your example. Need help sir.

[@berksezer4751]

5M is the number of shares AUTHORIZED, not outstanding. On the right side of 5M, it says 721k shares outstanding. That is what one should regard when it comes to the cash reserved for the par value. Since no par value - and thus no cash - has been guaranteed for stocks that are yet to be issued, and the stocks that had been outstanding though have been acquired by the company through buy-backs simply belong to the company now.

[@duongtam4096]

just want to say tanks

[@BuyTheDip627]

What is par value?

[@mirosDV]

1:01 It's the minimum price a stock could ever be at. You will never buy that stock any cheaper.