How to Enter Treasury Stock Transactions in a Basic Statement of Stockholders' Equity

by Christopher Carter

When a company repurchases shares of its own previously issued stock, it is recorded in the general journal as treasury stock. Treasury stock can be reissued at any time by a corporation. Treasury stock does not carry voting privileges and there are no dividends associated with treasury stock. Shareholders' equity accounts, such as retained earnings, have a normal credit balance. However, treasury stock has a normal debit balance, since it reduces shareholders' equity in a company.

Indicate the date when the company repurchased its stock. Write the day and month of the treasury stock transaction.

Debit the treasury stock account for the appropriate amount. Assume a company repurchased 200 shares of treasury stock at $5 per share. Multiply number of shares times the price per share. This means the company must debit treasury stock for $1,000.

Credit the cash account for the amount spent to reacquire the shares. If a company paid $1,000 to repurchase treasury shares, the company must credit cash for $1,000. This indicates $1,000 cash was withdrawn from the company to purchase the treasury shares.

Write "purchase of treasury shares" in the statement of stockholders' equity. "Purchase of treasury shares" appears underneath the issuance of additional shares in the statement of stockholders' equity.

Communicate the cost of the treasury shares purchased throughout the period. Write parentheses around the treasury shares number to indicate that treasury shares decrease total stockholders' equity. For instance, $1,000 in treasury stock appears as ($1,000) on the statement of stockholders' equity.

Add the beginning balance of treasury shares with the purchase of treasury shares for the period. Continuing with the example, if the company's beginning treasury balance is ($4,000) and the purchase of treasury shares for the period equals ($1,000). In this scenario, the treasury shares balance written in the statement of stockholders' equity equals ($5,000).

Items you will need

  • General Journal
  • Statement of Stockholders' Equity

About the Author

Christopher Carter loves writing business, health and sports articles. He enjoys finding ways to communicate important information in a meaningful way to others. Carter earned his Bachelor of Science in accounting from Eastern Illinois University.