Contributed capital

Definition

Contributed capital is the total value of cash and other assets that shareholders have directly invested in a corporation. It represents funds received from issuing stock, including both common and preferred shares.

5 Must Know Facts For Your Next Test

1. Contributed capital is recorded under owners' equity on the balance sheet.
2. It includes amounts paid by investors above the par value of stock, known as additional paid-in capital.
3. Contributed capital does not include retained earnings, which are profits reinvested in the business.
4. Issuing new shares increases contributed capital while repurchasing shares decreases it.
5. Contributed capital provides initial and additional funding necessary for corporate operations.

Review Questions

Related terms

Owners' Equity: The residual interest in the assets of a corporation after deducting liabilities.

Retained Earnings:

The cumulative amount of net income that a company retains rather than distributing to its shareholders as dividends.

Additional Paid-In Capital (APIC): The amount paid by investors over and above the par value of a company's stock during an issuance.