For any compensation expense recognized, the offset is an expense in paid-in capital, which is a stockholders’ equity account. What does this mean?
This is wrt Share based compensation. You are giving folks Shares instead of payments as Cash. So you are issuing Shares (as options). Expense is recognised on the Income Statement (which reduces the Income) - moves into Retained Earnings. (on the equity side of the Balance sheet). To offset this expense - which is not really an expense - you would increase Additional Paid In Capital (on the Equity side of the Balance Sheet). Expense reduces Equity Side. Offset -> increase Additional Paid In Capital (also on Equity side of Balance sheet). Net effect = 0.
thanks. Very good explanation