What is stock?

Definition of Stock

In business there are at least common meanings for the term stock:

  • Some people use the word stock to mean inventory. In other words, they mean the goods (products, component parts, etc.) that a company has on hand for sale to customers.
  • The word stock is also used when referring to shares of ownership in a corporation.

Examples of Stock

The following are examples of the two meanings of stock:

  • When a company no longer has a certain item in its inventory due to an increase in sales, the customer may be told "The item you requested is currently out of stock, but we expect to have the item in stock within 5 working days."
  • A recently organized, regular U.S. corporation will be issuing 100,000 new shares of stock for $100 per share. All of the shares being issued are common stock with no par value. Shares of preferred stock are not being issued. When the stock is issued, the corporation will debit Cash and will credit its stockholders' equity account Common Stock for the amount received.

Free Debits and Credits Cheat Sheet

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