Final answer:
The partial equity method involves adjustments for the investor's share of earnings and losses in the investment's carrying amount, whereas dividends reduce the investment account. This differs from other methods like the cost method, which would recognize dividend income and maintain the initial investment at historical cost.
Step-by-step explanation:
The partial equity method is an accounting approach to record investments in other companies where the investor has significant influence but does not control the company outright. Unlike the cost method, which maintains the initial investment at historical cost, the partial equity method adjusts the investment account for the investor's share of the earnings and losses of the investee. The key difference under the partial equity method lies in recognizing these undistributed earnings or losses and consequently adjusting the carrying amount of the investment.
When using the partial equity method, the entries that are different compared to methods like the cost or consolidation include the recognition of the investor's share of the investee's earnings or losses. Instead of keeping the investment at its original cost, the investment account is increased by the investor's percentage of the earnings and decreased by the investor's percentage of the losses. Dividends received from the investee will reduce the investment account unlike under the cost method, where it is recognized as dividend income.
In summary, the primary differences when using the partial equity method are the adjustments to the investment's carrying amount, which reflect the investor's share of earnings and dividends and do not appear as income or loss directly in the income statement as they would with other methods.