Under the equity method, the initial investment is recorded at cost and this investment is increased or decreased periodically to account for dividends and the earnings or losses of the investee. The stockholders equity journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of stockholders equity.. Account Types. This differs from the consolidation method where the investor exerts full control Results of Journal Entry. This video shows the differences between the Equity Method and Fair Value Method of accounting for investments. Investments - Equity Method General Journal Entry. Typical financial statement accounts with debit/credit rules and disclosure conventions Compute the amount of income to be recognized under the equity method and make the journal entry for its recording. Indicate the impact that a change in fair value has on the reporting of an equity method investment. Description of Journal Entry. Equity Method Accounting Equity Method The equity method is a type of accounting used in investments. ... Investments – Equity Method and Joint Ventures, ASC 323; ... More Examples of Journal Entries Accounting Equation Double Entry Recording of Accounting Transactions Debit Accounts B Journal Entries 711 Bank reconciliation Current liabilities Debt, convertible Debt extinguishment Debt issued with stock warrants Debt security transfers among portfolios Dividends Effective interest method Employee stock ownership plan (ESOP) Equity method of accounting for investments Equity Accounting Definition. 4. Understand the handling of dividends that are received when the equity method is applied and make the related journal entry. Paid $1,500 rent. In contrast, the cost method accounts for the initial investment as a debit to an investments account and the dividends as a credit to a revenues account. –> Apply asc topic 323-10: Investments – Equity Method and Joint Ventures –> APB 18. App. Handbook: Equity method of accounting Latest edition: We explain the equity method of accounting in detail, providing examples and analysis. As mentioned above, equity method of accounting refers to the treatment that is applied for investments in associates as defined by International Accounting Standards.Equity Accounting reflects the economic reality (the substance) that the investing company does not have control over the associate and therefore, their accounts should not be consolidated. In each case the stockholders equity journal entries show the debit and credit account together with a brief narrative. 5.2.1 Guarantee of an Equity Method Investee’s Third-Party Debt 107 5.2.2 Collateral of the Investee Held by the Investor When Equity Losses Exceed the Investor’s Investment 107 5.2.3 Investee Losses If the Investor Has Other Investments in the Investee 108 22.214.171.124 Percentage Used to Determine the Amount of Equity Method Losses 113 This method is used when the investor holds significant influence over investee, but not full control over it, as in the relationship between parent and subsidiary. The equity method for long-term investments of between 20 percent and 50 percent.