Capital Stock - Explained
What is Capital Stock?
Written by J. Mance Gordon
Updated at April 22nd, 2024
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What is Capital Stock?
Capital stock refers to the total preferred and common shares issued to shareholders by a corporate entity. These shares form a percentage of the total number of shares authorized for the entity. Shareholders refer to capital stock as the amount of shares in a stock in a corporation that they own while accounts consider capital stock as the percentage of all capital shareholders pay.
How Does Capital Stock Work?
For purposes of accounting, capital stock consists of the nominal value (generally designated by the par value assigned to the stock at the time of authorization) of all shares that has been issued to shareholders. Shares are issued above their par value (issued at a premium) or at less than their par value (at below par or a discount to par).
How is Capital Stock Used?
For accountants, capital stock consists of nominal value, which is the par value allocated to the stock during authorization. Shares can be issued below or above their par value.