One of the two methods that accounted for stock held as an investment in another corporation. The equity method is used if the investing firm exercises significant control over the other corporation (investee). Under this method the investment is recorded at cost. Any net earnings of the investee are recorded in proportion to the investor’s share of ownership as an increase in the investment account of the investor. Dividends or net losses of the investee result in a decrease in the investing firm’s investment account.