Dictionary / Par Value
What does Par Value mean in accounting?
Quick definition
Equity & capitalThe face amount of capital stock or other securities when issued. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
A $1 par share sold for more
You run an upholstery shop as an S-corp. On April 17 you issue 300 shares of common stock printed at $1 par. A silent partner wires $8,400 into the shop checking for those 300 shares. Par is the $1 face printed on each certificate, $300 in total, not the $28 she paid per share. Debit Checking $8,400, credit capital stock $300, and credit additional paid-in capital $8,100; in QuickBooks Online, split the deposit and do not park the whole $8,400 on the stock line.
Par is not the company's value
You run a gutter and exteriors shop. On September 9 you apply for a truck-season line at the bank and write $4,000 as the company's value because the articles list 800 shares at $5 par. That $4,000 is only the printed face of the issued stock, not what the business is worth. The balance sheet already shows vans, ladders, and equity; the lender wants those figures, not par times shares. If they ask for par, put it in a stock footnote and attach the balance sheet for value; send par as the company value and the packet comes back understated.
Why it matters
Par value is the printed face amount on capital stock or another security when it is issued, not the market price and not what the buyer paid. You will not post this most months; it shows up when you form a corporation, issue shares, or complete a form that asks for the face on the certificate. No-par value stock has no face, so do not invent one; credit only the printed face to the stock line and put the excess in additional paid-in capital. Treat par as what the company is worth and a lender will see a number that has nothing to do with your equity or the balance sheet.
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What is Par Value in bookkeeping?
The face amount of capital stock or other securities when issued.
When should I use Par Value?
Use Par Value when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Par Value?
Par Value is used for par value entries, while Paid-In Surplus covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.