Accounting for treasury stock is done by the cost method.
What is cost method?
- The "cost method" bases the cost of inventory on the average cost of the items that were offered for sale at the time.
- The cost method is calculated by dividing the total cost of the products that are being sold by the total number of units that are being sold. The units in the ending inventory are given a weighted-average unit cost as a result.
- Simple weighted cost method and perpetual weighted cost method are the two most widely utilized average cost approaches. An approach to figuring out ending inventory costs is to use cost method. It may alternatively be known as "WAVCO."
- It divides the cost of the items that are for sale by the quantity of units that are for sale.
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