This video shows the difference between Common Stock and Additional Paid-in Capital.
Common Stock and Additional Paid-in Capital are both Stockholders' Equity accounts that appear on the Balance Sheet, and they both represent capital given to the company in exchange for shares of stock.
Common Stock and Additional Paid-in Capital are two separate accounts, however, because Common Stock is money received for the stock's par value while Additional Paid-in Capital is any money received over and above the stock's par value. For example, if Twitter issues 1 share of stock with a par value of $2, and an investor gives Twitter $30 for that share of stock, then Twitter would record an increase of $2 to its Common Stock account and an increase of $28 to its Additional Paid-in Capital account. The combined effect would increase Twitter's Stockholders' Equity by $30.
Common Stock and Additional Paid-in Capital are sometimes lumped together and called "contributed capital."
Some companies issue common stock that has no par value. If Twitter issued 1 share of no-par stock for $30, it would simply increase Common Stock by $30. In that scenario, there would be no Additional Paid-in Capital.—
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