How to Record Stock Par Value

The par value of stock is the arbitrary value established by a company for the initial offering of stock. Most stocks have a very low par value since there is no way to determine the actual value when starting out; the value may be as low as 1 cent per share. In some state, par value is replaced by "stated value," which is a value established by the company's board of directors to establish the minimum value of each stock share. Recording the par value establishes the stock on the balance sheet of the company.

Instructions

1. Establish the value of each stock share. For the sake of this example, assume each share of stock has a par value of 10 cents per share and that 5,000 shares have been issued.

2. Write a ledger entry with the date of the stock issuance. The account name is "Common Stock."

3. Multiply the number of shares by the value of each share. In this example, that is 5,000 shares multiplied by 10 cents per share equaling $500.

4. List the $500 on the same line as the category of Common Stock in the "credit" column. This is an asset the company is considered to have, not a debit.

Tips & Warnings

• While some states require a par value, other states don't. Check with an accountant to determine the regulations where you are. If you are not required to determine a par value, then you can maintain a zero in the credit column on the company ledger.

References

• Accounting Coach: Paid-in Capital or Contributed Capital