Explain how the purchase of treasury stock affects the accounting equation

The purchase of treasury stock would result in a decrease in stockholders' equity account and an asset account. The journal entry for the transaction is as follows:

Treasury stock is reported as a deduction in the common stock account under the stockholders' equity account. Thus a debit on this account would represent a decrease in total stockholders' equity. A credit on cash, on the other hand, would result in a decrease in total assets. In this transaction, like what should be in every transaction, the accounting equation would still be balanced and equal.