Treasury stock is when a company repurchases its own stock off the market; hence reducing its shares outstanding. Treasury stock is a contra-equity account. It reduces the stockholders equity account. These stocks are neglected when calculating the shares outstanding portion of the earnings per share formula. They do not issue any dividends, and can be sold at a gain or loss. To record the purchase and issuance of Treasury stock, it can be done using two different methods. The Cost Method or the Par Value Method; can be used to determine the total amount of stock holders equity account.
