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stock valuation
What is the difference between par and no par value stock?
Some states’ laws require or may have required common stock issued by corporations residing in their states to have a par value. The par value on common stock has generally been a very small amount per share. Other states might not require corporations to issue stock with a par value. So the par value on common stock is a legal consideration.
From an accounting standpoint, the par value of an issued share of common stock must be recorded in an account separate from the amount received over and above the amount of par value. For example, if a corporation issues 100 new shares of its common stock for a total of $2,000 and the stock’s par value is $1 per share, the accounting entry is a debit to Cash for $2,000 and a credit to Common Stock—Par $100, and a credit to Paid-in Capital in Excess of Par for $1,900. In total the Cash account increased by $2,000 and the paid-in capital reported under stockholders’ equity increased by a total of $2,000 ($100 +$1,900).
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