Question

Purchase of Treasury Stocks results in decrease in *


a.liabilities

b.contra equity

c.contra assets

d.equity

​

Answer 1

(B) contra equity is the correct answer

Answer 2

The purchase of treasury stocks results in a decrease in equity.

• Treasury stock is the earlier outstanding stock that the issuing company purchases back from its shareholders.

• It represents a contra equity account which is registered in the shareholder's equity balance sheet.
• Treasury stock depicts the buyback of total shares from the market, which decreases the equity of shareholder due to the stock's charged price.