Definition
Par value of shares
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 20,000 shares at $50 per 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 (20,000 shares at $50/share)
$1,000,000