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It is important to keep paid-in capital separate from earned capital because they are completely different numbers. The stockholders’ equity section of a corporation’s balance sheet includes paid-in capital and retained earnings. The distinction between paid-in capital and retained earnings is important from a legal and an economic point of view. Paid-in capital is the amount paid in to the corporation by stockholders in exchange for shares of ownership. Retained earnings are earned capital held for future use in the business. The primary objectives in accounting for the issuance of common stock are to (1) identify the specific sources of paid-in capital and (2) maintain the distinction between paid-in capital and retained earnings.
Investors often use the dividend per share as a measure to determine the real value of a share. Proponents of this school of thought argue that the earning per share is of no real value to anyone but those who can determine the policies of a......

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Approximate Word Count: 413
Approximate Pages: 2 (250 words per double-spaced page)

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