A more thorough explanation:

Definition: Capital stock, also known as authorized stock, refers to all common stock and preferred stock a corporation is legally allowed to issue. A corporation’s charter establishes the amount of shares the corporation may issue, and the board of directors can either issue the maximum amount or retain a portion of the shares. Corporations record capital stock in the equity section on their balance sheets. The amount of capital stock issuable by a company can be changed, but the process requires amending the corporate charter, usually involving difficult, expensive shareholder voting.

Let's say a company has a charter that allows them to issue 1,000 shares of common stock and 500 shares of preferred stock. The board of directors decides to issue 800 shares of common stock and 300 shares of preferred stock. This means that the company has issued a total of 1,100 shares of capital stock.

The company records this information in the equity section of their balance sheet. If the company wants to issue more shares of capital stock, they would need to amend their charter, which can be a difficult and expensive process.

This example illustrates how capital stock represents the total number of shares a company is authorized to issue, and how the board of directors can choose to issue a portion of those shares. It also shows how the amount of capital stock can be changed, but only through a difficult and expensive process.