APIC Accounting


In accounting, APIC refers to the additional paid-in capital generated during the initial public offering of the company’s shares. In this article, we define APIC in accounting, how it works, the formula, an explanation of related terms, benefits, use, and FAQ. Let’s dive into everything APIC accounting.

APIC Accounting Definition

The abbreviation for APIC in accounting means additional paid-in capital, which represents the difference in value investors pay on top of the par value of the stocks. It occurs only during the Initial Public Offering (IPO) when investors buy newly-issued shares directly from the company. The shares are released at a specific value, and investors bid on top of that price. The additional cash the company collects is available for them to use as they please.

Additional paid-in-capital is also known under the following terms:

  • Contributed Capital in Excess of Par
  • Capital in Excess of Par Value
  • Contributed Surplus
  • Paid-In Capital in Excess of Stated Value

APIC Accounting Formula

The APIC accounting formula is:

APIC = (Issue Price – Par Value) x Number of Shares Acquired by Investors

How Additional Paid-In Capital Accounting Works

During the Initial Public Offering, a company can offer its stock for any price they consider appropriate. In the same fashion, investors can bid whatever amount they want above the issued price, also known as par value. The excess between the par value and the price the investor pays creates additional paid-in capital. Here’s a practical example:

A tech company releases one million shares of stock during its IPO, each having a par value of $1 per share. Investors bid for $5, $10, and $15 above the par value, and ultimately the stocks sell for $15 per share. The company makes $15 million during the IPO, out of which $14 million is attributed to APIC ($15 million minus the par value of $1 million).

The accounting for stock sale with APIC on the company’s balance sheet is as follows: the one million generated from the par value will be itemized as paid-in capital (PIC), and the $14 million excess as additional paid-in capital. 

APIC accounting on the balance sheet is always shown separately under the shareholder’s equity section. At the same time, the money made from the par value of the stocks is known as common stock, with the par value standing next to it as a reference. Modern businesses typically use accounting software to record these events quickly and accurately. 

Accounting statistics show that a stock’s par value is typically set very low, sometimes as low as $0.01, meaning that most of the value will be represented as APIC rather than common stock. The total amount generated by the IPO is recorded on the debit side in the equity section, while the common stock and APIC are represented on the credit side. 

APIC won’t be affected by stock price fluctuations once the company starts trading on the secondary market. When purchasing shares directly from a firm, the amount the investors pay is PIC for the firm that sold the shares. Afterward, when stocks are traded in the secondary market, the money from the sale of shares will go into the accounts of investors selling their positions.

Par Value vs. Market Value

Par represents the value a firm gives to stock during its IPO. This value is assigned before there’s a market for that security. Firms set the par values very low to avoid lawsuits that might occur if the stock value decreases below its par value. In mark-to-market accounting, market value is the value of a stock determined by the market at a given time.


The difference between PIC and APIC accounting is that the first is a broader term that contains the second. 

Paid-in capital is the total amount of money and other assets received in exchange for stock. It includes the par value of common and preferred stock and the amount paid above the par value, known as additional paid-in capital. 

On the other hand, additional paid-in capital accounting represents only the excess amount paid above a stock’s par value. Both paid-in and additional paid-in capital are included in the shareholder equity section of a balance sheet. 

APIC Accounting Benefits and Use

Additional paid-in capital has many benefits for the company that issues shares. The issuing doesn’t increase the fixed cost of a company, nor should the company pay investors in any way. Investors don’t have power over the company’s assets, yet the company is free to use the collected funds through the IPO in any way they see fit. The APIC effect on accounting is positive — the additional cash can be used to purchase new assets, scale, pay off loans, etc. 

APIC may also increase the company’s equity capital before retained earnings accumulate. The extra chunk of cash or assets can protect against losses if retained earnings decrease. 

APIC Accounting FAQs

What does APIC stand for in accounting?

The accounting term APIC means additional paid-in capital in accounting. We have a complete list of accounting abbreviations that you might find helpful. 

Is APIC the same as PIC in accounting?

There’s a difference between APIC and PIC in accounting. Paid-in capital (PIC) is the total amount a company receives from issuing shares. APIC accounting means additional paid-in capital and represents the extra cash paid by investors above the stock’s par value.

Can APIC accounting be negative?

There’s no APIC accounting minus. APIC can never be negative because the par value is always set above zero.

What part of the accounting equation is APIC?

The APIC accounting entry is recorded as credit under shareholder’s equity. 

Is APIC a credit or debit balance?

The APIC accounting journal entry takes place on the credit balance. 

Is APIC included in retained earnings?

When it comes to accounting for common stock, APIC, and retained earnings, APIC is not included in both. Retained earnings include the company’s profit after all direct and indirect costs, income taxes, and dividends are paid. On the other hand, APIC represents the majority of shareholders’ capital immediately after a firm’s IPO when retained earnings have yet to accumulate. 

What are par and APIC?

Par is the stock’s value assigned by the company on the Initial Public Offering (IPO). It’s typically set very low. Additional paid-in capital, or APIC, is the excess amount of money investors pay on top of a stock’s par value.

Why would you debit APIC?

According to the double-entry accounting rules, APIC is marked as a debit in the asset section and as a credit in the entity section of the balance sheet.

Is APIC included on a shareholder basis?

APIC is recorded as credit under shareholder’s equity.

How do you reduce APIC?

A company can reduce its APIC in various ways, including repurchasing shares, liquidating dividends, vertical mergers, etc. 

Why does APIC increase?

A new issue of shares sold above their par value increases APIC. 

Do S corps have APIC?

In corporate accounting, S corps can record additional capital contributions on its books as APIC.

Do distributions reduce APIC?

Dividend distributions are paid from retained earnings and don’t affect APIC accounting.

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