Everything You Need to Know About Authorized Capital and Paid-up Capital

What is Authorized Capital?

Authorized capital is the maximum amount of shares that a company can issue. It is the amount of money that the company is authorized to raise from investors. Authorized capital is usually stated in the company’s articles of association.

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What is Paid-up Capital?

Paid-up capital is the amount of money that has been invested in a company by its shareholders. It is the amount of money that the company has actually received from investors. Paid-up capital is usually less than authorized capital because not all of the authorized shares are always issued.

Difference between Authorized Capital & Paid up Capital

The main difference between authorized capital and paid-up capital is that authorized capital is the maximum amount of shares that a company can issue, while paid-up capital is the amount of money that has been invested in the company by its shareholders.

Authorized Capital

  • Authorized capital is the maximum amount of shares that a company can issue.
  • It is the amount of money that the company is authorized to raise from investors.
  • Authorized capital is usually stated in the company’s articles of association.

Paid-up Capital

  • Paid-up capital is the amount of money that has been invested in a company by its shareholders.
  • It is the amount of money that the company has actually received from investors.
  • Paid-up capital is usually less than authorized capital because not all of the authorized shares are always issued.

Examples

  • A company has an authorized capital of 100,000 shares.
  • The company issues 50,000 shares to investors.
  • The company’s paid-up capital is 50,000.

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Conclusion

Authorized capital and paid-up capital are two important terms that are used in corporate finance. It is important to understand the difference between these two terms in order to make informed investment decisions.

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