Treasury stock is:

Treasury stock is:

• A. Included in the outstanding shares count
• B. A liability on the balance sheet
• C. A deduction from shareholders' equity
• D. A separate asset class

Answer: (C)

Treasury stock represents shares that the company has repurchased and holds itself. They are not part of the shares outstanding because they sit in the company's hands, not with outside investors, so they don’t confer voting rights or dividends. When the company buys back these shares, it uses cash, reducing assets. To keep the accounting balance, the treasury shares are recorded as a contra-equity item that reduces total shareholders’ equity. Because of this placement, treasury stock is shown as a deduction from equity on the balance sheet, not as an asset or a liability.

Treasury stock represents shares that the company has repurchased and holds itself. They are not part of the shares outstanding because they sit in the company's hands, not with outside investors, so they don’t confer voting rights or dividends.

When the company buys back these shares, it uses cash, reducing assets. To keep the accounting balance, the treasury shares are recorded as a contra-equity item that reduces total shareholders’ equity. Because of this placement, treasury stock is shown as a deduction from equity on the balance sheet, not as an asset or a liability.