When the equity method of accounting for investments in another company's voting shares is used, the balance of the investment in shares account is affected by:

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When the equity method of accounting for investments in another company's voting shares is used, the balance of the investment in shares account is affected by both the earnings and dividends of the investee company. This is because the equity method requires the investor to record its share of the investee's earnings as an increase in the investment account, while dividends received are recorded as a reduction in the investment account. Therefore, the balance of the investment in shares account will be impacted by both earnings and dividends of the investee company.

When the Equity Method of Accounting for Investments in Another