Paid-Up Capital 101: Everything You Need to Know

Paid-Up Capital: The Key to Unlocking Business Growth

Paid-Up Capital

Paid up Capital Meaning

Paid up Capital refers to the amount of money that a company has received from its shareholders for the issuance of its shares.

It is the total amount of funds invested by shareholders in a company in exchange for ownership.

Paid-up capital is a crucial factor in determining a company's financial stability, as it shows the amount of funds available to support business operations and growth.

This amount is recorded in a company's balance sheet and is different from authorized capital, which is the maximum amount of capital that a company is allowed to raise by issuing shares.

How to Calculate Paid up Capital

To calculate paid-up capital, you can use the following formula:

Paid-Up Capital = Number of Shares Issued x Face Value of Each Share

Where:

Number of Shares Issued refers to the total number of shares that a company has issued to its shareholders.

Face Value of Each Share refers to the value assigned to each share by the company at the time of issuance.

For example, if a company has issued 1,000 shares with a face value of Rs. 10 each, the paid-up capital would be calculated as:

1,000 shares x Rs. 10 = Rs. 10,000.

This formula gives you the total amount of funds received by the company from its shareholders in exchange for shares of ownership.

What are types of Share Capital?

The main types of share capital in the world of Company Law, Finance and Accounting are as follows:

Authorised Capital: This is the maximum amount of share capital that a company is authorised to issue by its articles of association or incorporation. Authorised Capital is the theoretical upper limit of the company's share capital.

Issued Capital: This is the portion of the authorized capital that has actually been issued to the public or private investors in exchange for funds. It represents the actual number of shares that are in circulation and held by shareholders.

Paid-up Capital: This is the portion of the issued capital that has been fully paid for by the shareholders. It represents the actual funds received by the company from the sale of shares.

These three types of share capital are interrelated and together determine the financial position of a company.

Companies must ensure that they remain within the limits set by their authorized capital and only issue shares within that limit.

The amount of paid-up capital received from the sale of shares can be used by the company for its operations, to pay off debts, and for other purposes.

What is Difference between Share Capital and Paid-Up Capital?

Share capital and paid-up capital are related but distinct concepts in the world of Company Law, Finance and Accounting.

Share Capital refers to the total amount of money that a company has raised by issuing shares of stock to the public or private investors. This is the total theoretical value of all the shares that a company has issued and outstanding.

Paid-up Capital, on the other hand, is the actual amount of money that shareholders have paid for the shares they own. It is a subset of the total share capital and represents the actual funds received by the company. Paid-up capital is the money that the company can use to invest in its operations, pay off debts, and fund other expenses.

In summary, share capital represents the total value of all issued shares, while paid-up capital represents the actual funds received by the company from the sale of shares.

Disclaimer: The information provided above is not intended to constitute legal advice, accounting advice or any other advice of a professional nature. The content should not be used as a substitute for professional advice. You should always consult your own professional for advice before making important personal or professional decisions. Your reliability on this data provided above is solely at your own risk.