par value

(noun)

The amount or value listed on a bill, note, stamp, etc.; the stated value or amount.

Related Terms

Examples of par value in the following topics:

  • Bonds Issued at Par Value

    • To record a bond issued at par value, credit the "bond payable" liability account for the total face value of the bonds and debit cash for the same amount.
    • Bonds issued at par value are relatively simple to calculate and record.
    • When a bond is issued at par value it is sold for the face value amount.
    • Since the bonds are sold at par value, the amount of cash the company receives should equal the total face value of the issued bonds.
    • Explain how a company would record a bond issued a par value

  • Redeeming at Maturity

    • The carrying value of bonds at maturity will always equal their par value.
    • In other words, par value (nominal, principal, par or face amount), the amount on which the issuer pays interest, and which, most commonly, has to be repaid at the end of the term.
    • For a bond sold at discount, its carrying value will increase and equal their par value at maturity.
    • For a bond sold at premium, its carrying value will decrease and equal the par value at maturity.
    • In case of a zero coupon bond, only the amount of par value is paid when the bond is redeemed at maturity.

  • Accounting for Sale of Stock

    • If the common stock is sold above par value the journal entry is slightly different.
    • Credit additonal paid in capital (to account for the difference between par value and sell value)
    • The sale of preferred stock is similarly treated, but a separate accounts should be established to record preferred stock and any additional paid in capital for preferred stock sold at above par value.
    • Treasury stock also doesn't have the right to vote, receive dividends or receive liquidation value.

  • Issuing Bonds

    • The market price of a bond is expressed as a percentage of nominal value.
    • For example, a bond issued at par is selling for 100% of its face value.
    • Bonds can sell for less than their face value, for example a bond price of 75 means that the bond is selling for 75% of its par (face value).
    • Bonds are considered issued at a discount when the coupon interest rate is below the market interest rate.That means a company selling bonds at a discount rate receive less than the face value of the bond in the sale.

  • Bonds Issued at a Discount

    • For the issuer, recording a bond issued at a discount can be a little more difficult than recording a bond issued at par value.
    • Because the issuer receives less cash for the bond than the face value, this difference must be recorded in the company records as a discount expense.
    • As a result, the bond must be sold at an amount less than its face value.
    • When a bond is sold, the company records a liability by crediting the "bonds payable" account for the bond's total face value.
    • The business then debits the difference between the bond's face value and what it receives in cash from the sale.

  • Types of Bonds

    • Bonds may be registered as to principal (or face value of the bond) or as to both principal and interest.
    • A call premium is the price paid in excess of face value that the issuer of bonds must pay to redeem (call) bonds before their maturity date.
    • They are issued at a substantial discount to par value, so that the interest is effectively rolled up to maturity (and usually taxed as such).

  • Redeeming Before Maturity

    • Redemption is made at the face value of the bond unless it occurs before maturity, in which case the bond is bought back at a premium to compensate for lost interest.
    • Most callable bonds allow the issuer to repay the bond at par.

  • Characteristics of Bonds

    • Nominal, principal, par, or face amount—the amount on which the issuer pays interest, and which, most commonly, has to be repaid at the end of the term.
    • Most callable bonds allow the issuer to repay the bond at par.

  • Accounting for Interest Earned and Principal at Maturity

    • Nominal, principal, par, or face amount —is the amount on which the issuer pays interest, and which, most commonly, has to be repaid at the end of the term.

  • Loss Restoration

    • Fixed asset values can be revised to reflect an increase or decrease in value; upward revisions can recover earlier impairment losses.
    • Under US GAAP, once an asset is impaired its value cannot be increased regardless of what its fair market value is; once the value of an asset is decreased, it stays at that value unless its market value declines again.
    • The asset account is debited (increased) for the increase in value or credited (decreased) for a decrease in value.
    • The revaluation surplus account accounts for increases in asset value, and it also offsets any downward revisions, such as an impairment loss, in asset value.
    • Only assets accounted for under the revaluation model can have their book value adjusted to market value.