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When the treasury stock is sold back on the open market, the paid-in capital is either debited or credited if it is sold for less or more than the initial cost respectively. Another common way for accounting for treasury stock is the par value method. In the par value method, when the stock is purchased back from the market, the books will ...
However, there are instances of accounts, known as contra-accounts, which have a normal balance opposite that listed above. Examples include: Contra-asset accounts (such as accumulated depreciation and allowances for bad debt or obsolete inventory) Contra-revenue accounts (such as sales allowances) Contra-equity accounts (such as treasury stock)
Equity accounts are used to recognize ownership equity. The terms equity [for profit enterprise] or net assets [not-for-profit enterprise] represent the residual interest in the assets of an entity that remains after deducting its liabilities (CF E61). Equity accounts include common stock, paid-in capital, and retained earnings. Equity accounts ...
Treasury stock appears as a contra-equity balance (an offset to equity) that reflects the amount that the business has paid to repurchase stock from shareholders. Retained earnings (or accumulated deficit) is the running total of the business's net income and losses, excluding any dividends .
The flow of funds accounts follow naturally from double-entry bookkeeping; every financial asset is also a liability of some domestic or foreign human entity. A fundamental fact about any economic sector is its balance sheet, a breakdown of its physical and financial assets, and of its liabilities.
In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity.
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Capital surplus, also called share premium, is an account which may appear on a corporation's balance sheet, as a component of shareholders' equity, which represents the amount the corporation raises on the issue of shares in excess of their par value (nominal value) of the shares (common stock).