Home Financial & Banking Terms Accounting Value of the Stock

Accounting Value of the Stock

Accounting Value of the Stock refers to the business assets minus the liabilities. It is also known, in some cases, as owner’s equity, shareholder’s equity or equity. The Accounting Value of the Stock is often used by the investors in order to determine the business equity as compared to the market value of the business. The formula for calculating this is the total common stockholder’s equity divided by the number of common shares.

Accounting Value vs Market Value

The Accounting Value of the Stock of a business is different from the market value. Accounting Value of the Stock is a way of looking backwards, whereas the market value is a way of looking at the present and towards the future.

This value is also referred to as the historical cost. There are certain very essential and valuable assets that a business has but these assets cannot go on the balance sheet of the company. Assets like trademarks, brand names, reputations and so on have no accounting value to a business, as these are intangible assets. It is only after an intangible asset is sold that it can have an accounting value.

The stock of a company is always listed at the accounting or the book value, rather than the market value. This is the reason that the book value of the company is usually less than what the selling value would be.