Contributed surplus is the accounting term used whenever shares are sold at a price above their stated par value the value authorized in the company’s charter and included on the stock certificate.
When a contributed surplus occurs, two entries are made on a company’s balance sheet:
- The first entry shows how much money was raised by the sale of shares at par value
- The second shows the amount raised above par value
Details about the sale of shares are normally found in the notes to the financial statements.
More about contributed surplus
In the example below, ABC Co. sells 20,000 shares at $50 per share for a total of $1,000,000. Each share’s par value is $10, meaning the contributed surplus for each share sold is $40:
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