Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Treasury Stock

Financial Accounting

12. Stockholders' Equity

Treasury Stock

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Multiple Choice

When a company repurchases its own securities, the stock is recorded in which account?

Retained Earnings

Treasury Stock

Additional Paid-In Capital

Common Stock

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Verified step by step guidance

Understand the concept of Treasury Stock: Treasury Stock represents shares that a company has repurchased from its shareholders. These shares are held by the company and are not considered outstanding shares.

Recognize that repurchasing shares does not affect Retained Earnings directly. Retained Earnings is a cumulative account that reflects the company's net income minus dividends over time.

Note that Additional Paid-In Capital is related to the amount received above the par value of shares when they are initially issued, not when they are repurchased.

Understand that Common Stock represents the par value of shares issued by the company and is not affected by the repurchase of shares.

Conclude that when a company repurchases its own securities, the transaction is recorded in the Treasury Stock account, which is a contra-equity account that reduces total stockholders' equity.