Common stock account
/What is the Common Stock Account?
The common stock account is a general ledger account in which is recorded the par value of all common stock issued by a corporation. When these shares are sold for an amount in excess of their par value, the excess amount is recorded separately in an additional paid-in capital account. When shares have no par value, the entire amount of the sale price is recorded in the common stock account.
Presentation of the Common Stock Account
The common stock account is classified as an equity account, and so appears near the bottom of a reporting entity’s balance sheet. This presentation appears in the following example of the equity section of a balance sheet.
FAQs
How Does the Common Stock Account Affect a Company’s Balance Sheet?
The common stock account appears in the equity section of a company's balance sheet and represents the par value of shares that have been issued to shareholders. It increases the company's total shareholders’ equity, reflecting the owners’ initial investment in the business. While the common stock account itself only shows the par value, any amount received above par is recorded in a separate account called additional paid-in capital. Together, these accounts demonstrate the company’s capital structure and provide insight into how much funding has been raised through issuing common shares. As such, the common stock account contributes to the recorded ownership investment described on the balance sheet.