It stands for additional paid-in capital; a part of an entity’s capital that represents the value of share capital it issues in addition to the stated par value of its stock (both common and preferred). It is usually received from investors during the stage of an initial public offering (IPO). This part of the paid-in capital is usually perceived as the “extra” amount (subscription profit) that an entity receives when it floats its stock in the open market (i.e., for the public) for the first time. For example, if an entity is issuing its share at $20 (the issue price), while its par value (the base price) is $10, then the additional paid-in capital is:

Issue price – stated par value = 20- 10 = $10

The additional paid-in capital formula = (Issue Price – Par Value) × number of shares issued
If 1000 shares are issued, then:

Additional paid-in capital = ($20 – $10) x 1000 = $10,000

The additional paid-in capital is an accounting item that is presented, in the statement of financial position, under shareholders’ equity.

It is known a capital surplus.