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Buy back of shares journal entries

Buy back of shares means to buy own shares. It is the purchase of own shares from shareholders. It is the great tool to increase EPS and showing high performance for each shareholder. With this, company's liability for shareholders' decreases and its positive impact on ERP. 

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    • ##a-solid fa-landmark##  In the Books of Company
      •  Company journal entires process starts when shareholder will take action on its offer.

 1. When shareholder accept the offer of buy back and payment due to shareholder

Equity share capital ( Buy-back shares) Dr

Premium on buyback Dr

Equity shareholders' account Cr


Logic of Journal Entires : Share capital is liability of company when shareholder accepts the buy back offer, it means, shareholder is selling his share and company is payable to directly to individual shareholer. So, for decreasing share-capital from balance sheet liability, it is necessary to debit the equity share capital as ledger account impact on balance sheet. Shareholder will attract this offer if buy back offer price is more than market price. So, this premium is loss of company will debit and total liability of equity shareholder will increase will credit. 

2. When payment made to Equity Shareholder

Equity shareholder account dr

Bank account cr


3. When premium on back back deducted from Reserves and surplus

Reserve and surplus account Dr. 

primium on buy back account Cr.


4. When expenses paid for buy back paid 

Expenses for buyback account Dr.

Bank account Cr.

5. Transfer of expenses to profit and loss account 

Profit and loss account Dr.

Buy back expenses account Cr. 

  • [message]
    •  ##fa-solid fa-user##   In the Books of Shareholder
      •   Shareholder journal entires process starts when shareholder will take action on its offer means sell his shares to company  .


 1. When shareholder accept the offer of buy back and payment due to shareholder

Company's Account  Dr

Gain on buyback Cr

Investment in Company Shares's account Cr

Logic of Journal Entires : It is the entry of receivable amount from company. and Investment account of company shares will credit because asset of investment will decrease and gain on Buyback account credit 

2. When payment received from company 

Bank Account  Dr

Company account Cr

3. When Gain on back back transfer to profit and loss account 

Gain on Buyback Account Dr.

Profit and loss Account Cr. 

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Accounting Education: Buy back of shares journal entries
Buy back of shares journal entries
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