If you hold at least 20 percent of the investee's shares, use the equity method unless you can prove you have no influence over the investee – for example, if the investee treats you hostilely ...

Journal Entries in the Equity Method of Accounting for Investments. A company uses the equity method of accounting when it has significant influence over a company in which it has invested.

With joint ventures, the equity method and proportional consolidation method of accounting could be used. Learn the differences between both and which is used most now.

For example, if an investment company owns 30% of another firm and that firm earned $10 million in profits in a given year, the equity method of accounting would include the firm's pro rata share ...