Paid-in capital refers to the various properties invested by investors as capital into the enterprise. It is the source of the total legal capital registered by the enterprise. It indicates the owner's basic property rights relationship with the enterprise. The proportion of paid-in capital is the main basis for enterprises to distribute profits or dividends to investors. China's Enterprise Legal Person Registration and Management Regulations stipulate that, unless otherwise specified by the state, the paid-in capital of an enterprise shall be consistent with the registered capital. When an enterprise's paid-in capital increases or decreases by more than 20% compared to the original registered capital, it should apply for change registration to the original registration authority with proof of capital use or capital verification certificate.

The enterprise shall confirm the invested capital based on the actual monetary, physical and intangible assets received in accordance with the enterprise's articles of association, contract, agreement or relevant regulations. The establishment of a company must be subject to capital verification by a Chinese certified public accountant.

(1) For monetary investments, confirmation and verification are mainly based on receipt receipts. For foreign exchange investments made by foreign investors, certificates from the foreign exchange administration authorities of the place where the profits originate should be obtained.

(2) For capital contributions based on physical assets such as buildings, machinery and equipment, materials and supplies, confirmation should be based on various relevant vouchers, and physical inventory and on-site investigation should be conducted to verify the relevant invest. Houses and buildings should have property rights certificates.

(3) For capital contributions based on intangible assets such as patent rights, proprietary technologies, trademark rights, land use rights, etc., all relevant vouchers and documents should be used as the basis for confirmation and verification. The industrial property rights and know-how invested by the foreign joint venturer must meet the prescribed conditions.

Generally, the paid-in capital of enterprises should be calculated according to the following provisions:

1. The capital invested by investors in cash shall be the actual amount received or deposited in the bank where the enterprise has an account. Record the capital received. The excess of the amount actually received or deposited into the enterprise's bank account in excess of its share of the enterprise's registered capital shall be included in the capital reserve.

2. The capital invested by investors in the form of non-cash assets shall be recorded as paid-in capital based on the value confirmed by the investing parties. Intangible assets received from investors for the initial issuance of stocks shall be recorded at the book value of the intangible assets at the investor.

3. If the foreign currency invested by the investor does not have an agreed exchange rate in the contract, it will be converted according to the exchange rate on the day when the investment amount is received; if the exchange rate is agreed in the contract, it will be converted according to the exchange rate agreed in the contract. The conversion difference caused by different exchange rates will , treated as capital reserve.

4. If a Sino-foreign cooperative joint venture returns investors’ investment during the cooperation period in accordance with relevant laws and regulations, the returned investment shall be separately accounted for and included in the balance sheet as paid-in capital. Subtractions are reflected separately.

The main accounting treatment of paid-in capital.

(1) When an enterprise accepts capital investment from investors, it debits "bank deposits", "other payables", "fixed assets", "intangible assets", "long-term equity investment" and other accounts, and Its share in the registered capital or share capital is credited to this account, and the difference is credited to the "Capital Reserve - Capital Premium or Equity Premium" account.

(2) The stock dividends distributed in the profit distribution plan approved by the shareholders' meeting shall be debited to the "Profit Distribution" account and credited to this account after the capital increase procedures are completed.

If the capital reserve is converted into capital by resolution of the shareholders' meeting or similar organization, the "Capital Reserve - Capital Premium or Equity Premium" account will be debited and this account will be credited.

(3) Convertible corporate bond holders exercise their conversion rights to convert the bonds they hold into stocks. According to the balance of the convertible corporate bonds, debit "Bonds Payable - Convertible Corporate Bonds" (Par value, interest adjustment)" account, according to the amount of its equity component, debit the "Capital reserve - other capital reserve" account, the total par value of the stock calculated based on the stock par value and the number of converted shares, credit this account, The difference shall be credited to the "Capital Reserve - Equity Premium" account. If there is a cash payment for non-convertible shares, accounts such as "Bank Deposits" should also be credited.

If an enterprise converts restructured debt into capital, the book balance of the restructured debt shall be debited to "Accounts Payable" and other accounts, and the creditor shall be credited to the total face value of the company's shares due to the relinquishment of creditor's rights. In this account, the difference between the total fair value of the shares and the corresponding paid-in capital or equity is credited or debited to the "Capital Reserve - Capital Premium or Equity Premium" account, and the difference is credited to "Non-Operating "Income - Debt Restructuring Gains" account.

(4) If equity-settled share-based payment is exchanged for services provided by employees or other parties, the amount determined based on the actual exercise situation shall be debited to "Capital Reserve - Others" on the exercise date. The "Capital Reserve" account is credited to this account according to the amount that should be included in the paid-in capital or share capital.

4. If an enterprise applies for approval to reduce its registered capital in accordance with legal procedures, this account will be debited and "cash on hand", "bank deposits" and other accounts will be credited.

If a joint-stock company reduces its capital by acquiring the company's shares, the total face value of the shares calculated based on the face value of the shares and the number of canceled shares will be debited to this account, and the book balance of the canceled treasury shares will be credited to " "Treasury stock" account, according to the difference, debit the "Capital Reserve - Equity Premium" account. If the equity premium is insufficient to offset, the "Surplus Reserve" and "Profit Distribution - Undistributed Profits" accounts should be debited; purchase If the price paid to return the shares is lower than the total face value, the total face value of the shares should be credited to the "Capital Reserve - Equity Premium" account.

5. The enterprise (Sino-foreign cooperative operation) returns the investor's investment during the cooperation period according to the contract, debit this account (returned investment), credit "bank deposit" and other accounts; at the same time, debit The account "Profit Distribution - Return of Profit to Investment" is credited to the account "Surplus Reserve - Return of Profit to Investment".

For the liquidation of Sino-foreign cooperative operations, debit this account, "Capital Reserve", "Surplus Reserve", "Profit Distribution - Undistributed Profit" and other accounts, and credit this account (investment has been returned) , "Bank deposits" and other subjects.

6. The ending credit balance of this account reflects the total paid-in capital or equity of the enterprise.