First, paid in capital and retained earnings are the major categories of stockholders’ equity.

Paid in capital, also referred to as contributed capital, is the amount that the corporation received from stockholders when the corporation issued its stock. Paid in capital is also referred to as permanent capital.

Retained earnings is the cumulative amount of after tax net income earned by the corporation since its inception minus the dividends that have been distributed to the stockholders since the corporation began.

Learn more about Stockholders’ Equity.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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