Accounting treatment of stock repurchase and cancellation
(1) When repurchasing the company's shares,
Debit: Stock in stock (actual amount paid)
Loans: bank deposits
(2) When the stock is cancelled,
Borrow: share capital (total face value of cancelled shares)
Capital reserve-equity premium (the difference is deducted from the equity premium first)
Surplus reserve (if the equity premium is insufficient, the surplus reserve will be offset)
Profit distribution-undistributed profit (the share capital premium and surplus reserve are still insufficient)
Credit: Treasury shares (book balance of Treasury shares is cancelled)
When the repurchase price is lower than the total face value of the repurchased shares,
Debit: share capital (total face value of cancelled shares) and credit: treasury shares (book balance of cancelled treasury shares).
Capital reserve-equity premium (difference)
What is stock repurchase?
Stock repurchase refers to the behavior of a listed company to buy back a certain number of shares issued by the company from the stock market in cash. After the stock repurchase is completed, the company may cancel the repurchased shares. However, in most cases, the company reserves the repurchased shares as "treasury shares", which no longer belong to the issued shares and does not participate in the calculation and distribution of earnings per share. Treasury shares can be used for other purposes in the future, such as issuing convertible bonds and employee welfare plans. Or sell them when you need money.
The way to buy back shares
1, the centralized bidding trading mode of the stock exchange. (At present, this method is adopted in our country)
2. Offer method.
3. Other trading methods recognized by China Securities Association.