Accounting Demystified phần 7 pps

102 Accounting Demystified

need to deliver stock to fulfill the company’s obligation to a

stock option or bonus plan. In any event, the stock re￾purchased by the company is called treasury stock. If there is a

difference between the number of shares issued and the num￾ber of shares outstanding, it is because of treasury stock. Once

the stock has been issued to the public, it is counted as issued,

but if it is repurchased by the company and held as treasury

stock, it is not included in the total of the stock outstanding. If

a company has no treasury stock, then the figures for the is￾sued and outstanding shares will be the same.

The following example will illustrate:

Example A

Number of shares authorized: 1,000,000 shares

Number of shares issued 500,000 shares

Number of treasury shares 0 shares

Therefore, the number of shares outstanding is 500,000

shares (500,000 shares issued – 0 shares in treasury).

Example B

Number of shares authorized 1,000,000 shares

Number of shares issued 500,000 shares

Number of treasury shares 200,000 shares

Therefore, the number of shares outstanding is 300,000

shares (500,000 shares issued  200,000 shares in treasury).

Recording the Issuance

No matter whether the stock is par value, no par value but

stated value, or no par value, the debit part of the transaction

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