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Buying back
Treasury stock is stock that's been repurchased by a company.
Scenario: You run a lemonade stand, and decide to buy back 5 shares in your lemonade stand at $5 per share.
Cash = 5 shares x $5 per share
Cash = $25
Credit to Cash because we are spending $25 on our own shares, and assets (Cash) have a normal debit balance.
Debit to Treasury Stock because we've obtained $25 in our own stock, and contra-equity accounts (Treasury Stock) have a normal debit balance.
Reselling
Scenario: You resell 2 shares of your lemonade stand's treasury stock that you originally purchased for $5 per share for $8 per share.
Cash = 2 shares x $8 per share
Cash = $16
Treasury Stock = 2 shares x $5 per share
Treasury Stock = $10
The rest of the treasury share price (minus original price paid) goes into the Additional Paid-In Capital account.
Additional Paid-In Capital = 2 shares x ($8 - $5)
Additional Paid-In Capital = 2 shares x ($3)
Additional Paid-In Capital = $6
Debit to Cash because we are receiving $16 from stockholders for our treasury stock, and assets (Cash) have a normal debit balance.
Credit to Treasury Stock because we've removed $10 of Treasury Stock from our possession, and contra-equity accounts (Treasury Stock) have a normal debit balance.
Credit to Additional Paid-In Capital because we've created $6 worth of extra capital beyond original treasury stock price, and equity accounts (Additional Paid-In Capital) have a normal credit balance.
