Financial Reporting: Equity Method conceptual troubles balance, conceptual, Investment, question

chunty

Alright, so in the Equity method:

Balance Sheet-
===================
Cost of the Investment
+ Share in Earnings
- Share in the Dividends

Income Statement-
===================
Share in the Earnings



My question is, to balance THE ACCOUNTING EQUATION ..Is the reduction in the Assets' side of the Balance Sheet compensated by -

ADDING THE DIVIDENDS to the CASH BALANCE

or

by eliminating the DIVIDENDS from the Income Statement as well ?