How is common stock typically measured on the balance sheet?

Common stock is typically measured on the balance sheet at par value. Par value represents the nominal or face value of the stock as stated in the company's charter. It is often a small and arbitrary amount, such as $0.01 or $1.00 per share. This value is significant because it establishes the minimum amount that must be paid by shareholders when they purchase shares from the company.

When a company issues common stock, it records the par value in the common stock account on the balance sheet. Any amount received above the par value is recorded as additional paid-in capital. This method of measurement provides a consistent and standardized approach to reporting equity financing and aligns with accounting principles that require stocks to be recorded at their par value at the time of issuance.

While market value, fair value, and book value are other important concepts in financial accounting, they pertain to different aspects of stock valuation and are not the basis for recording common stock on the balance sheet. Market value reflects the price at which the stock is currently trading in the market, fair value considers the price that would be received to sell an asset in a transaction between willing parties, and book value represents the net asset value of the company as recorded on the balance sheet. Each of these