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Common stock belongs in a dated, class-level equity analysis. Common stock records an ownership class whose holders usually have residual rights after senior claims. The instrument and governing documents determine voting, dividend, liquidation, conversion, and other rights. The account balance usually reflects par or stated capital rather than market value.
Apply it
If 100,000 $1-par common shares are issued for $8 each, common stock increases by $100,000 and additional paid-in capital increases by $700,000. The $8 issue price does not become the per-share common-stock balance.
Review common stock against preferred stock. Reconcile common stock to par or stated value, the dated common stock evidence, and its final presentation.
The common stock record ties preferred stock to its source date, measured amount, and par or stated value effect.
Keep the boundary clear
The word common does not prove a specific legal right. Accounting applies the supplied terms and sends unresolved legal validity questions to counsel.
Authority
Read ASC 505-10-50-3 for rights and privileges of outstanding securities.
Put the concept to work
Apply this concept
- Explain and apply common stock within a reconciled class-level equity workpaper using supplied authoritative facts.
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- Equity — Understand
To apply this concept: Required. This prior idea supplies the quantities or classification needed for the current analysis.
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- Par or stated value — Apply
Required level here: apply. Required. This prior idea supplies the quantities or classification needed for the current analysis.