What is the method of own capital?

The

self -capital method is a standard accounting technology that is used when the company holds a significant amount of shares of another company and has a significant impact on its operations. This method is used to assess and report profits earned by companies or a company that has invested more than 20% of shares in another company. A significant impact also means that the investor can participate in certain corporate processes, such as sitting on the Board of Directors and involvement in the creation of policy, decision on management and transactions of the company that can affect the financial functioning of the company. The percentage of the shares held by the investor is used as a measure of the amount of influence over the company. The higher the percentage of the shares, the greater the potential of return or loss of initial investment. Prodly the capital method can only be used if the investor can prove ownership of more than 20% of shares and has a significant impact on the company.

The

self -capital method is used to finance the investor's ownership in the investment and income of another company. A company that buys shares in another company is entitled to the percentage of profits of the company in which it has invested. The evaluation value of the investment is based on the share of the company's assets. After applying the self -capital method, the investor can report and reflect the earned income up to the percentage of the investment. This amount is then reflected as a profit in the profit and loss statement.

The accounting on behalf of the investor will record the costs of the initial investment of shares as well as any profits and losses and income obtained. The investor occasionally have to review shares for a change so that the revenue record is made to reflect the loss or profit of shares. The company's final profit will then be recorded in the investor's profit report for the equivalent of the percentage invested. Just as the income reflects, it is a loss.

The

self -capital method is a practice that allows companies to obtain maximum investment revenues that have carried out in other companies. For example, if a company A invests 25% in B and Company B, this year earns $ 1 million (USD); Company A can use the capital method. By using the capital method, the company can reflect investment income of $ 250,000 USD, an equivalent percentage of what it owns.