Par value is the value of a single common share as set by a corporation’s charter. It is not typically related to the actual value of the shares. In fact it is often lower. Any stock certificate issued for shares purchased shows the par value. When authorizing shares, a company can choose to assign a par value or not.
More about the par value of shares
In the example below, ABC Co. sells 20,000shares at $50per share, for a total of$1,000,000. The par value per share is$10. Here’s how the sale would be recorded on balance sheet:
Common stock (par value$10)
$200,000
Contributed capital/surplus
$800,000
Shareholder’s equity
$1,000,000
If the shares were issued without a par value, the sale would be recorded as follows:
Common stock (20,000shares at$50/share)
$1,000,000
Related definitions
- Cash(def.)
- Inventory(def.)
- Equipment(def.)
- Land and buildings(def.)
- Investments(def.)
- Pre-paid expenses(def.)
- Patents(def.)
