Definition
An asset acquired to earn income or grow in value, such as stocks, bonds, or an ownership stake in another company. Investments are reported as current or long-term assets on the balance sheet. The accounting method depends on the level of influence: fair value for small stakes, the equity method for significant influence (typically 20–50%), and consolidation for control.
Example
A company buys 30% of a supplier for $500,000 and uses the equity method. When the supplier earns $100,000, the investment account increases by $30,000.