 In this presentation, we will take a look at multiple choice questions related to corporations. First question, Treasury stock is either A, an asset account, B, a contra asset account, C, a revenue account, D, a contra equity account, or E, a liability account. Okay, so once again, we'll go through this, we'll use the process of elimination in order to narrow these options down. Treasury stock is either A, an asset account. Now, if we don't know what Treasury, Treasury stock probably sounds familiar and we probably maybe have some kind of idea of what it is, but if we don't know what it fully is, then we can try to just look at the terminology and say, hmm, it's Treasury some kind of stock. So some kind of stock you would think it would be an equity type of thing. So I would think that you would think based on the fact that it's a stock in it, that maybe it has something to do with the equity section. So I'm going to say that it's probably not going to just based on that probably not an asset. Now if you think of the actually purchase, you may start to think it's an asset because we're basically purchasing our own stock back. So and we would debit Treasury stock and credit. So if you wrote this down, it would be a debit to Treasury stock. It would be a debit and we would credit cash. And if you look at that, if it was any other stock, you would think that the debit there would go to an asset. So if you write the journal entry down, you might start thinking maybe it's an asset. But if you just look at the terminology, you would say, hmm, stock is probably some type of equity if it's our stock and we're talking about corporate stock here. So I'm going to cross it out. B says a contra asset account. And again, a contra asset is still an asset. It means it's an asset with a contra balance to the normal balance, which means a credit balance for an asset. So that's kind of like accumulated depreciation is a contra asset account, but it's not any asset account because it's got stock and we're assuming guessing that that will be in the equity section. C says a revenue account. Now revenue is kind of in the equity section because it's part of the income statement which closes out to equity. So I'll keep that for now. D says a contra equity account. So that contra account might kind of throw us off. We would say, hmm, equity sounds kind of right because it says stock and I'm thinking that's going to be in the equity section by contra equity account. I don't know. Contra typically means it has a balance opposite to the normal balance. Is that the case for it? I don't know. I'll keep that for now. E says a liability account. And again, Treasury stock, I'm going to same argument for the fact that it's not an asset. I'm going to say it says stock. So I'm going to say it's not a liability then. I'm going to say it's probably in the equity section. So we'll keep C and D and go through this again. Treasury stock is either C or D either a revenue account or a contra equity account. Now of those two, the fact that the second one is an equity account, I would like to see just an equity account that would be most correct, you know, sound right to me. So we got equity here and we got revenue here. I would think it's not revenue because, you know, if it's our stock that we're talking about, we're probably not probably it has nothing to do with revenue or expenses. We're selling an interest in our stock. So although revenue does close out to equity, it doesn't sound right. So I would think the contra equity would sound most appropriate. The only contra might sound a little unusual to us. Why would it be contra? Well, the Treasury stock represents us buying back our own our own stocks. If we issued stock into the market, we would debit cash or whatever we issued it for and credit the stock and then additional paid in capital or whatever. But the stock would be out there. And then if we bought our own stock back, kind of an unusual thing to do, we would debit Treasury stock, we would then call it Treasury stock. That means we bought our own stock back, which had already been issued in the past. And we would put it on the books not as an asset, but as an equity section account. And we would credit cash. So it would be on the books as the equity section. And normally equity accounts such as retained earnings and common stock have credit balances, total equity will have a credit balance. And this is a debit balance because we bought back our own stock. So it's it's contra to the norm of the equity accounts, which is a which would be a debit as opposed to a credit note that that contra account can be confusing because some people, when they learn contra accounts, we first learn it with accumulated depreciation, which is a contra asset account, which is the first type of contra accounts we learn. So we start might maybe thinking that contra accounts have credit balances just because our cumulative depreciation is a contra counts and has a credit balance. But the thing that makes it contra isn't that it has a credit balance, it's that the normal balance of an asset type account is a debit. And the accumulated depreciation has the opposite or contra to the normal balance, which is a credit for an asset type account. If we're talking about a liability account, as we are here, liability accounts have a normal credit balance. Therefore, to be contra to the norm, we'd have to be a debit balance.