What is a share, and how does an ordinary share differ from a preference share?
What a shareholder actually owns, why face value differs from market price, and where ordinary and preference shares part ways. Using «Zarafshon Keramika» JSC as an example: on which balance sheet lines (410, 420, 440) and accounts (8310, 8320, 8410, 8610) shares appear.
A friend says, "I bought «Zarafshon Keramika» shares." What did he buy? Not one of the factory's kilns or a box of tiles. He bought a very small but precisely measurable part of the whole business. Below we use one hypothetical example to look at what that part gives, what risk it carries and how it appears in the company's own books.
What kind of paper is a share?
Article 49 of the Tax Code defines a security as a document that certifies "property rights or loan relations" between the legal entity that issued it and its holder, provides for income in the form of dividends or interest and allows these rights to be transferred to others. Part two of the article lists as securities: - shares; - bonds; - bills of exchange; - certificates of deposit; - depositary receipts; - options; - futures and forward contracts; - Islamic securities (certificates); - other papers recognised as securities under the legislation or the applicable legislation of a foreign state.
In this list a share sits on the "property rights" side: its holder has not lent money to the company but owns part of it. A bond, by contrast, certifies a loan relationship; we show the difference in a table in a separate article.
What does a shareholder get, and what does he risk?
As a general concept, a share gives its holder three things: the chance to receive part of the company's profit (a dividend), a say in management (usually through voting) and a share of the remaining assets if the company is liquidated. The exact scope of rights is set by legislation and the company's charter.
The risk matches. If the company does well, dividends and the share price may grow. If it does badly, there may be no dividend at all and the share price may fall. A shareholder does not pay the company's debts out of his own pocket, but he can lose the money he put into the shares.
Face value and market price: two different numbers
Face value is set when the share is issued, and that is the value kept in the company's books: under paragraph 346 of NAS No. 21, shares are carried on accounts 8310 "Ordinary shares" and 8320 "Preference shares" at face value. The market price is whatever a buyer and a seller agree on: it changes with the company's results, expectations and the general market mood.
A hypothetical example. «Zarafshon Keramika» JSC has issued 600,000 ordinary shares with a face value of 2,000 soums each. Durbek bought 3,000 of them:
| Indicator | Calculation | Result |
|---|---|---|
| Durbek's stake in ordinary shares | 3,000 / 600,000 | 0.5% |
| Face value of the shares | 3,000 × 2,000 | 6,000,000 soums |
| Value at a market price of 2,600 soums | 3,000 × 2,600 | 7,800,000 soums |
| If a dividend of 150 soums per share is declared | 3,000 × 150 | 450,000 soums (before tax) |
The market price rising to 2,600 soums does not change the company's books: account 8310 still shows 600,000 × 2,000 = 1,200,000,000 soums. For Durbek the difference is real: if he sells, he gets the market price, not the face value. How tax is withheld from dividends is covered in a separate article.
Ordinary vs preference shares: comparison table
| Criterion | Ordinary share | Preference share |
|---|---|---|
| Vote in management | Usually carries a vote | Voting right often limited |
| Dividend | Depends on profit and the shareholders' decision, not guaranteed | Usually paid in a pre-set manner and before ordinary shares |
| On liquidation | Further back in the queue | Usually receives its share before ordinary shares |
| Risk and growth potential | Higher | Lower |
| Account in the company's books | 8310 "Ordinary shares" | 8320 "Preference shares" |
| Statement of equity | Lines 132 and 152 | Lines 131 and 151 |
The first four rows of the table are general concepts: in a particular company the rights are set by legislation and the charter. The last two rows come from official documents: the accounts from paragraph 343 of NAS No. 21, the report lines from the "For reference" section of the statement of equity approved by Order No. 181.
Article 41 of the Tax Code singles out payments on preference shares: any income received by a shareholder when a legal entity's profit is distributed, "including in the form of interest on preference shares", is treated as a dividend. So a payment on a preference share is a dividend for tax purposes even if it is called "interest".
Where do shares sit on the company's balance sheet?
Hypothetical data for «Zarafshon Keramika» JSC: ordinary shares 1,200 million soums (8310), preference shares 50,000 × 2,000 = 100 million soums (8320), share premium from selling shares above face value 180 million soums (8410), the company's own shares bought back from shareholders 24 million soums (8610).
| Balance sheet line (Order No. 181, Annex 1) | Accounts | Amount, million soums |
|---|---|---|
| 410 Charter capital | 8310 + 8320 | 1,300 |
| 420 Additional paid-in capital | 8410 | 180 |
| 440 Treasury shares | 8610 | 24 (deducted) |
| Effect on own funds | 410 + 420 − 440 | 1,456 |
Why is line 440 deducted? Under paragraph 360 of NAS No. 21, the 8600 accounts are contra-liability accounts to charter capital and are shown on the balance sheet as a deduction from charter capital. The balance sheet form itself gives the Section I total as "410+420+430-440+450+460+470".
Does a stock split change the books?
Sometimes a company "splits" its shares: it reduces the face value and increases the number of shares in proportion. Paragraph 345 of NAS No. 21 says that since this operation does not affect the amount of shareholders' capital, no journal entry is made, and the change is recorded in the analytical registers opened for account 8310.
A hypothetical example: if «Zarafshon Keramika» splits each ordinary share in two, instead of 600,000 shares × 2,000 soums there will be 1,200,000 shares × 1,000 soums. Charter capital stays at 1,200,000,000 soums and Durbek's stake stays at 0.5%; only the number of his shares rises to 6,000.
In short
- A share certifies not a debt owed by the company but an ownership stake in it.
- In the company's books a share is carried at face value; for the investor the market price matters.
- An ordinary share implies more say in management and more growth potential, a preference share more stable income; the exact rights are in the charter.
- On the balance sheet, charter capital (410) and additional paid-in capital (420) are added, treasury shares (440) are deducted.
Important note: this article is written for explanation and is not a recommendation to buy or sell any shares.
Test yourself
5 questions on this topic: pick an option or reveal the answer.
A joint-stock company's annual net profit is 90 mln soum, of which 10 mln soum is directed to dividends on preferred shares. The weighted average number of ordinary shares outstanding during the year is 40 000. What are the earnings per ordinary share (EPS = (net profit − preferred dividends) / number of ordinary shares)?
"Oqtepa sut" JSC bought back from shareholders 1 500 of its own ordinary shares with a nominal value of 4 000 soum at 5 200 soum each (7 800 000 soum in 8610) and then cancelled them, reducing the charter capital. Under the table in paragraph 348 of NAS No. 21, how is the cancellation recorded?
In its initial issue, "Ko'hitang" joint-stock company placed 2 000 ordinary shares with a face value of 5 000 soum at 6 500 soum each; the money was received in the settlement account. What is the excess over face value (additional paid-in capital), and with what journal entry is it recorded under NAS No. 21?
"Navbahor tekstil" JSC split its shares: for each ordinary share with a nominal value of 10 000 soum, 5 new shares with a nominal value of 2 000 soum each were issued, and the charter capital amount did not change. How is this transaction recorded under NAS No. 21?
A company took a bank loan of 48 000 000 soums to use for building a new warehouse, at 18% simple interest per year. Construction is in progress. What is one month's interest, and how is it recorded under the table in paragraph 75 of NAS No. 21?
Answered: 0 / 50 of 5 correct
All tests →See also
- What is recorded in the books when a joint-stock company issues shares and buys back its own shares?
- What is a bond: coupon, face value, maturity and how it differs from a share
- The world's first joint-stock company and the Amsterdam exchange
- Share
- Ordinary share
- Preference share
- Face value
- Dividend
- Stock split
- Finance section
Sources
- Tax Code of the Republic of Uzbekistan (version as of August 2026): Article 49 · definition of a security and the list of its types
- Tax Code: Article 41, part one, item 1 · concept of a dividend, including profit in the form of interest on preference shares
- NAS No. 21 "Chart of Accounts for the Financial and Economic Activities of Business Entities and Instructions for Its Application" (Order No. 191 of the Minister of Economy and Finance of 14 November 2024, registered by the Ministry of Justice on 27 December 2024 under No. 3593; in force from 1 January 2025): paragraphs 343–346, paragraph 360 · accounts 8310, 8320, 8330; shares carried at face value; stock split; contra-liability nature of 8600
- Regulation on the Deadlines, Composition and Content of Financial Statements (approved by Order No. 181 of the Minister of Economy and Finance of 8 October 2024, registered by the Ministry of Justice on 4 November 2024 under No. 3567): Annex 1 (balance sheet, lines 410, 420, 440 and 480), Annex 3 (statement of equity, lines 130–152)
- «Zarafshon Keramika» JSC and Durbek example, figures · prepared by the author, hypothetical