Paid Up Capital

Paid-up Capital Definition

Paid-up capital is the money a company gets from shareholders in exchange for shares. This is usually done through an initial public offering (IPO). This money is the company's actual raised capital. When shares are sold on the secondary market, it doesn't increase the paid-up capital. In some places, having a certain amount of paid-up capital is a legal requirement for starting a company or getting specific licenses. 

Understanding the Concept 

Paid-up capital is derived from the face value of the stock and additional capital. Each stock has a base price, its face value, which is usually less than ₹100. Any amount paid over the face value is additional paid-up capital. This shows in the balance sheet as common stock or preferred stock under the shareholder equity section. 

For example, if a company sells 100 shares of common stock with a face value of ₹100 each for ₹4,15000, the balance sheet would show a paid-up capital of ₹4,15,00000. This consists of ₹100 of common stock and ₹4,14,90000 of additional paid-up capital.