Treasury Stock Cost Method
Definition: Repurchased shares at cost
Scope:NarrowDifficulty:Moderate
Repurchased shares at cost
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Buy back shares | ||
| Repurchase 1,000 shares at $15 each. | ||
| Treasury StockContra Equity+ | $15,000 | |
| CashAsset− | $15,000 | |
| Contra-equity account. Reduces total equity. | ||
| 2. Reissue above cost | ||
| Reissue 1,000 treasury shares at $18. | ||
| CashAsset+ | $18,000 | |
| Treasury StockContra Equity− | $15,000 | |
| Additional Paid-In Capital — Treasury | $3,000 | |
| Excess over cost goes to APIC. | ||
| 3. Reissue below cost | ||
| Reissue 1,000 treasury shares at $12. | ||
| CashAsset+ | $12,000 | |
| Additional Paid-In Capital — Treasury | $3,000 | |
| Treasury StockContra Equity− | $15,000 | |
| Shortfall reduces APIC (then Retained Earnings if needed). | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Treasury StockTreasury StockAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$15,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$15,000.00
$15,000.00
$15,000.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$18,000.00
$12,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$15,000.00
$15,000.00
Additional Paid-In Capital — TreasuryAdditional Paid-In Capital — TreasuryAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$3,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$3,000.00
$0.00
DurationLong-Term
External Links
- Treasury stock — Wikipedia