How to Report Common Stock Above Par Value

by Bryan Keythman

Some states require a company to have a par value per share of common stock, which is an amount it must retain as financial reserves and cannot pay out as dividends. A company typically sets par value per share to an immaterial amount, such as one cent, and sells each share to investors for a higher amount. When your company sells common stock for a price above par value, report the total par value of the shares in one account and the amount you received above par value in a separate account on your balance sheet.

Multiply the number of shares of common stock your company sold to investors by the par value per share to determine the total par value of your common stock. For example, assume you sold 100,000 shares of common stock with a par value of one-tenth of one cent per share. Multiply 100,000 by $0.001, to get $100 in total par value.

Multiply the number of common shares sold by the price for which your company sold each share to calculate the total money you raised from common stock. Continuing with the example, assume your company sold each share for $5. Multiply 100,000 by $5 per share to get $500,000 in total money raised from common stock.

Subtract the total par value from the total money raised from common stock to calculate the money raised above par value. In this example, subtract $100 from $500,000 to get $499,900 in money raised above par value.

Report the total par value of your common stock as a line item called “Common stock” in the shareholders’ equity section of your balance sheet. In this example, report “Common stock $100.”

Report the money raised above par value as a line item called “Paid-in capital in excess of par value” on the line below common stock in the shareholders’ equity section of your balance sheet. In this example, report “Paid-in capital in excess of par value $499,900.”

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