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Share Capital

  • Definition of Share Capital
  • Share Capital in the Balance Sheet

Definition of Share Capital

Share Capital is the amount of money a company raises by issuing common or/and preferred stocks. It is also known as “capital stock.” Here, the term “Share Capital” is dissimilar from the shareholder’s equity.  Since the term share capital does not include retained earnings.

Company and/or corporation issue equity shares to external investors or the public in order to meet the financial requirements for business expansion. Likewise, share capital provides a strong base for the company’s financial status. Share capital can be increased through additional public offerings.

Share Capital in the Balance Sheet

In accounting, the Share Capital is outlined by a company on its balance sheet under the head “shareholder’s fund.” Shareholder’s equity section usually includes common stock, preferred stock and additional paid up capital. The maximum amount a firm can raise is known as authorized share capital. The stock sales proceeds are recorded at their nominal par value in the balance sheet.

The amount of share capital shown in the balance sheet includes only the payment made directly for acquisitions. It will remain unaffected by the later sales and acquisitions and the rising or falling rates in the open market of the securities.