Is treasury stock a contra account?
Understand the Problem
The question is asking whether treasury stock is classified as a contra account in accounting terms. Specifically, it seeks to understand the nature of treasury stock and its role within financial statements.
Answer
Yes, treasury stock is a contra account.
The final answer is Yes, treasury stock is a contra account.
Answer for screen readers
The final answer is Yes, treasury stock is a contra account.
More Information
Treasury stock is a contra equity account because it reduces shareholder equity by the amount spent to repurchase the shares. It is not considered an asset and is recorded with a debit balance.
Tips
A common mistake is to confuse treasury stock with assets. Treasury stock reduces equity, while assets represent economic resources.
Sources
- Investopedia - Treasury Stock - investopedia.com
- Treasury Stock - Overview, Share Repurchases, Limitations - corporatefinanceinstitute.com
- Wikipedia - Treasury Stock - en.wikipedia.org
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