Treasury Stock

Concept

What Is Treasury Stock?

Treasury stock is a company's own stock that has been repurchased from shareholders. It is a CONTRA-EQUITY account — it reduces total stockholders' equity. Treasury stock has no voting rights and receives no dividends.

Example

Cost Method (Most Common)

A company repurchases 500 shares at $30/share. Entry: Debit Treasury Stock $15,000, Credit Cash $15,000. Treasury stock is recorded at cost regardless of par value.

Example

Reissuing Treasury Stock

If those 500 treasury shares (cost $30) are reissued at $35: Debit Cash $17,500, Credit Treasury Stock $15,000, Credit APIC—Treasury Stock $2,500. If reissued below cost at $28: Debit Cash $14,000, Debit APIC—Treasury Stock $1,000, Credit Treasury Stock $15,000.

Key Point

Key Rule

You NEVER record a gain or loss on treasury stock transactions. Differences go to APIC—Treasury Stock, or if that is exhausted, to Retained Earnings.

Issuing Stock

Dividends & Retained Earnings

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Practice questions from this module to reinforce what you learned.

Practice Questions