Treasury stock encompasses an organizations normal debit balance; it is often void of reference to par value but recorded at cost and detailed as the reduction to the sum of stakeholder’s equity beneath the retained earnings. The journal entry for the purchase of stock involves the debit of treasury stock and the credit cash for the purchase price (AccountingForManagement.org, n.d.) .
When an organization’s treasury stock is sold, the revenue received is the debited to its cash; the cost of the shares that were sold is credited to the equity account treasury stock of stakeholders. Any difference will go to a different equity account of the stakeholders (AccountingForManagement.org, n.d.) .
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The three dates for recording cash dividends are the date of declaration; the date that was approved by the board of directors with an approved motion of selling its dividends. The date of record; is determined by the board and includes a record of the stockholders to receive dividends. The date of payment indicates when the organization will pay stockholders their dividends (Averkamp, n.d.) . The date of record is often not accompanied by a journal entry. Nonetheless is an organization was to declare its cash dividends on the fifth of May, the date of record would be the first of July and the declared cash dividend 1.25 dollars per share for stockholders (Averkamp, n.d.) . The journal entry for date of payment would then be on the tenth of July.
Stock splits result in an increase in the amount of shares outstanding and decrease the value per share. No journal entry is often required for stock split. Stock dividends are divided into small and large stock dividends (Averkamp, n.d.) . They will involve the issuance of additional shares of the corporation’s stock to existing shareholders. Stock dividends require journal entries and they are recorded by shifting amounts from retained earnings to the paid-in capital.
References
AccountingForManagement.org. Dividends payable - definition, explanation, journal entries and example | Accounting for Management. Retrieved 27 November 2019, from https://www.accountingformanagement.org/dividends-payable/
Averkamp, H. Treasury Stock and Accumulated Other Comprehensive Income | AccountingCoach. Retrieved 27 November 2019, from https://www.accountingcoach.com/stockholders-equity/explanation/
