UK Accounting Glossary
Capital stock is stock authorized for issue by the charter of any company. Capital stock includes both common and preferred stock. An accounting balance sheet item, capital stock represent the original investment amount of a corporation. Capital stock initial contributions remain on corporate ledgers at their original price. Capital stock account as shown on the balance sheet may increase as a result of new investment. For financial statement analysis purposes, an increase in capital stock may imply that a company is healthy and has investment capital available for new projects. Capital stock does not bear a relationship to the value of asset or stock outstanding. Capital stock must first be issued and then offered and listed in order to be publicly available for stock market trading. Capital stock is usually listed as a corporate asset in the corporate charter document, and capital stock contribution additions are typically noted in corporate charter amendments.
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This glossary post was last updated: 4th February 2020.