The issued share capital is the value of the capital that a company has already sold out to its investors in stock shares. Investors in the company may not have made payment yet on the stocks, but the company can calculate the value of what has been sold nonetheless. This amount may be only a portion of the amount of capital that the company is attempting to raise, which is represented by the authorized share capital. When calculating the issued share capital, any market changes in the value of the issued stock occurring after its sale are not to be considered.
Many companies raise the capital used to run their business by issuing shares of stock to investors, who can reap the rewards of their investments if the company succeeds. This stock sale can come through the open market to common stockholders, or it may be sold to preferred stockholders like the founders of the company or private investors. The amount of stock issued, in terms of the capital it has raised or will raise once payments are collected, is the issued share capital.
It's important to realize when regarding the issued share capital that it is a necessary balance sheet component for businesses, so it is represented in terms of capital. For example, imagine that a company has sold 100 shares of its stock at $10 US Dollars (USD) per share. The amount of capital issued in this case is 100 multiplied by $10 USD, or $1,000 USD. That's how much money the company can claim from the sales of those shares.
If the stock appreciates or depreciates in value on the open market, it has no bearing on the total of issued share capital. Using the example above, imagine that after the investors bought the shares, the price of the stock soared to $15 USD per share. Even though the total value of those 100 shares held by the investors has now soared to $1,500 USD, the company will still raise just $1,000 USD from the initial stock sale. The surplus belongs to the investors, not the company.
A company that issues shares of stock always has a maximum amount of shares it is willing to sell. The money raised if all of those shares are sold is known as the authorized share capital. This represents the total amount that the company ideally wishes to raise for its operations. Issued share capital represents whatever portion of the authorized share capital has already been raised from shares sold.
