Account Used To Record The Premium When Issuing Common Stock

The premium on issuing common stock is rarely recorded in an account having that name. It is more commonly recorded in an account called Paid-In Capital In Excess of Par Value. It may also be recorded in an account called Additional Paid-In Capital.

Paid-In Capital In Excess of Par Value is essentially the difference between the fair market value paid for the stock and the stock’s par value. In other words, it is the premium paid for an appreciated stock. Paid-In Capital In Excess of Par Value is created when investors pay more for their shares or stocks than the par value.

The account appears in the Shareholders’ equity section of the Balance Sheet. It does not appear in the Income Statement.

Conclusions:

Thus, premium on issuing common stock is recorded in Paid-In Capital In Excess of Par Value account or an account called Additional Paid-In Capital.