Balance Sheet - Capital versus Surplus

The money paid in by the stockholders is designated as Capital and the profits not paid out as dividends make up the Surplus.

The money paid in by the stockholders is designated as Capital and the profits not paid out as dividends make up the Surplus. So, capital and surplus represent the equity of the stockholders in the company as shown by the books.

The Capital is represented by share of stock which usually called common stock or preferred stock. Other titles have also come into used such as Class A, Class B, deferred shares, founders shares, etc...

Balance Sheet - Par Value

The Par Value of a share represent how much capital was paid in for each share by the original subscribers to the stock.

The shares may have a certain par value or without par value, the Par Value of a share represent how much capital was paid in for each share by the original subscribers to the stock.

A company with one million shares, par value $10, would presumably represent a far greater investment than another company with one million shares, par value $1. In the modern company start up the capital figure stated in balance sheet is lower than the actual amount paid in by the stockholders, the balance of their paid in capital are designated to the surplus.

The shares themselves may be given no par value, which means that theoretically they represent no particular amount of money contribution, but rather a certain fractional interest in the total equity. In many case nowadays a low par value is arbitrarily assigned to the stocks to reduce taxes and incorporation fees. So, this resulted in Capital and Surplus may be less meaningless in present days balance sheet.

For stock analysis purposes, it is prefer to take the total value of capital and various kinds of surplus items together to provide a single figure for the total equity of the stockholders.