The equity method causes the investment account to mirror the proportional changes in book value of the investee.

O True O False

true

Explanation:

The equity approach is an accounting methodology that a company uses to record profits gained in another corporation through its expenditure. With the accounting equity process, the creditor company considers on its financial statements the revenue generated by the other entity, in a sum equal to the ratio of its equity stake in the other firm.

In other words, The equity theory recognizes the concrete economic connection among two individuals. The creditor documents on the financial statements the portion of the return on that investment as profits from the company.