Question

can treasury stock be reported as an asset for the company? Is treasury stock entitled to receive any dividends from the company?

Answer 1

Treasury Stock is a contra equity item. It is not reported as an asset; and is subtracted from stockholders' equity. The presence of treasury shares will cause a difference between the number of shares issued and the number of shares outstanding.

Alternatively, treasury stock can be created when a company does a share buyback and purchases its shares on the open market. This can be advantageous to shareholders; it lowers the number of shares outstanding, thereby increasing the remaining shareholders' equity interest in the company.

Treasury stock is not entitled to dividend payments. Since only shares owned by the issuing company itself are considered treasury stock, it does not make sense to pay dividends to these. Dividend payments to treasury stock would result in the company paying money to itself.