What Are the Accounting Entries When You Buy Back a Partner's Stock?

A financial graph on an LCD screen.
A financial graph on an LCD screen. (Image: lukas_zb/iStock/Getty Images)

There are two ways to buy back a partner’s stock. Both ways start with the partners agreeing on a purchase price. Once that is done, one partner can buy all of the other partner’s stock by simply writing a check to the partner. This is similar to buying stock on the open market and no accounting entries are necessary as no money is moving into or out of the company. Accounting entries are needed only when it is the company itself that repurchases the stock.

Treasury Stock

Stock repurchased by a company is called treasury stock. The cost method is the most common accounting method used for this transaction. For example, if the agreed-on price is $10,000, a debit entry of $10,000 is made to the treasury stock account and a credit entry, for the same amount, is made to the cash account.

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