Buy back of shares

If a company wants to buy back its shares and it does not have enough free reserves + securities premium to transfer the nominal value of shares its buying back to CRR what entry has to be made ? Is buy back even possible ?

Replies (1)

Record the journal entry for the share buyback. The journal entry is very simple: the firm debits Treasury Stock for the total purchase price and credits Cash for the same amount. 

  • Treasury stock is a contra-equity account. It is not treated as an asset, because a company cannot legally invest in its own stock. Rather, treasury stock is presented on the balance sheet, where it reduces the total amount of owner's equity.
  • If the shares are purchased with another asset (for example, land instead of cash), that asset account should be credited instead.

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