Are you curious to know what is paid up capital? You have come to the right place as I am going to tell you everything about paid up capital in a very simple explanation. Without further discussion let’s begin to know what is paid up capital?
Paid-Up Capital is a vital concept in corporate finance, influencing the financial health and operational capabilities of a company. This article aims to provide a detailed exploration of “What Is Paid-Up Capital,” its formula, examples, and its role in the corporate financial landscape, especially in the context of India.
What Is Paid Up Capital?
Paid-Up Capital represents the portion of a company’s authorized capital that has been subscribed by shareholders and for which payment has been made. It signifies the actual investment made by shareholders in the company, forming a crucial component of its financial structure.
What Is Paid-Up Capital In India?
In the Indian corporate framework, Paid-Up Capital is governed by the Companies Act. It refers to the amount of capital that shareholders have contributed to a company, reflecting the real financial strength and resources available for business operations.
What Is Paid-Up Capital Formula?
The Paid-Up Capital Formula is straightforward:
Paid-Up Capital=Number of Shares Issued×Face Value per Share
This formula provides a clear calculation of the actual capital infused by shareholders into the company.
What Is Paid-Up Capital Example?
Consider a scenario where a company issues 10,000 shares with a face value of ₹10 each. If all these shares are subscribed and fully paid for, the Paid-Up Capital would be 10,000×₹10=₹1,00,000.
What Is Paid-Up Capital And Authorized Capital?
Authorized Capital is the maximum amount of capital that a company is legally allowed to issue, while Paid-Up Capital is the portion of authorized capital that shareholders have actually subscribed and paid for. The relationship between these two concepts delineates the financial capabilities of a company.
Paid-Up Capital Example:
Suppose a company has an authorized capital of ₹1,00,00,000 divided into 1,00,000 equity shares of ₹100 each. If shareholders subscribe and fully pay for 50,000 shares, the Paid-Up Capital will be 50,000×₹100=₹50,00,000.
Paid-Up Capital In Balance Sheet:
In a company’s balance sheet, Paid-Up Capital is typically listed under the shareholders’ equity section. It provides stakeholders and investors with a clear view of the actual capital contributed by shareholders, influencing the company’s financial health.
Paid-Up Capital Of Bank:
Banks, as financial institutions, also have Paid-Up Capital. This capital represents the funds invested by shareholders to support the bank’s lending and financial activities. Understanding the Paid-Up Capital of a bank is crucial for assessing its stability and financial robustness.
Authorised Capital Meaning:
Authorized Capital, also known as Nominal Capital or Registered Capital, is the maximum amount of capital that a company is permitted to issue to shareholders. This limit is specified in the company’s Memorandum of Association and can be increased through a formal process.
Conclusion –
In conclusion, Paid-Up Capital is a fundamental element in assessing a company’s financial strength and operational capacity. By understanding its definition, formula, and significance in the context of India’s corporate regulations, investors and stakeholders can make informed decisions. The interplay between Authorized Capital and Paid-Up Capital provides a comprehensive view of a company’s financial structure, influencing its growth and sustainability in the dynamic business environment.
FAQ
What Is Meant By Paid Up Capital?
Paid-up capital is the amount of money that the company gains by selling its shares and not the money that is borrowed. So the paid-up capital represents the company’s current status and how dependent the company is on the shares and how easily the company can pay off its debts.
How Do We Calculate Paid Up Capital?
Paid-up capital is the number of money shareholders has invested in the company. It can be calculated as follows: (TSR – LT Debt) + LT Equity = Paid-up Capital, where TSR refers to total shareholder’s funds and LT Debt refers to long-term debt.
What Is The Difference Between Total Capital And Paid Up Capital?
Authorised Capital is the maximum worth of shares a company can issue. Paid-up Capital is the actual worth of shares a company receives. The net worth of a company is not determined by its authorised capital. The paid up capital is the net worth of the company.
Authorized capital is the maximum value of the shares that a company is legally authorized to issue to the shareholders. Whereas, paid-up capital is the amount that is actually paid by the shareholders to the company. At any point, the paid-up capital of a company can never be more than its authorized capital.
I Have Covered All The Following Queries And Topics In The Above Article
What Is Paid-Up Capital In India
What Is Paid Up Capital Formula
What Is Paid Up Capital Example
What Is Paid Up Capital And Authorised Capital
Paid-Up Capital Example
Paid-Up Capital In Balance Sheet
Paid-Up Capital Of Bank
Authorised Capital Meaning
What Is Paid Up Capital
