Does Accounts Receivable Increase the Common Stock?

by Calla Hummel, studioD

The number of common stock in circulation depends on how many shares the company has sold to the public and granted as compensation to employees. "Accounts Receivable" is a line in the "Assets" section of the balance sheet valuing the amount of money that customers owe the company. Accounts receivable has no impact on the number of common stock, but may affect the value of common shares in small ways.

Accounts Receivable

Accounts receivable references all the money that clients owe a company in the short term. All invoices that the company has sent out, or monthly payments that it expects to receive, fall into the accounts receivable category. On the balance sheet, the item appears as a line, but accountants keep detailed ledgers specifying who owes what, when and how likely they are to pay up.

Common Stock

When a company goes public, it splits the value of ownership, also called equity, into fractional pieces and sells those pieces as shares of stock. Common shares are, unsurprisingly, the most common and carry rights to vote for members on the Board of Directors. The number of common shares depends on how many shares the company is authorized to sell, and how many of those they choose to sell or give to employees. The number of shares in circulation has nothing to do with accounts receivable.


Accounts receivable is an asset, and as an asset, the line item can increase the overall value of the company. If the total value of accounts receivable goes up, the value of the company goes up by the same amount, all else being equal, and if it goes down, so does the company's value. Shareholders judge a company's worth in part on the value of its assets minus its liabilities. As a result, an increase in accounts receivable may increase the value of common stock.

Share Value

The market value of a share of common stock changes constantly in response to many factors. One of these factors is the value of the company as judged by its assets and liabilities -- its "book value" -- of which accounts receivable is one factor. However, because accounts receivable is only one factor in many, a change in accounts receivable is unlikely to affect share value by a noticeable amount.

About the Author

Calla Hummel is a doctoral student studying contraband in international political economy. She supplements her student stipend by writing about personal finance and working as a consultant, as well as hoping that her investments will pan out.

Photo Credits

  • John Foxx/Stockbyte/Getty Images