Treasury stock accounting is referred to that type of accounting where a company is repurchasing its own shares. The stock that is repurchased by the company is called treasury stock and accounting of this stock is called as treasury stock accounting. The final decision is taken by the management that either they want to retain these shares on the permanent biases or they want to reissue or resell these shares after some time. There are several reasons due to which a company wants to repurchase its shares these may be explained as follows:-
A reason to repurchase the stocks is to decrease the number of shares circulating in the market hence to increase the earnings per share of the shareholders. The price of the stock is also increases if a company repurchases its own shares after the price falls at a certain threshold level. Another situation is that when a company forcefully buyback shares and stocks from another person or a business who is trying to conquer the business or get control over the business. Another situation of buying back the shares is that when a company wants to reduce the number of shareholders of the company. Sometimes a business has excess cash and there is no required use of the cash so business decides to repurchase its shares.
The repurchased stock does not effect on the voting power of the business and it is not included to have an effect on the earnings per share of the business.
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