Discuss the methods of accounting for Investment in Common Stock. Explain the concept of External Expansion? 

The accounting for funding in widespread inventory requires an evaluation of the monetary statements of an organization that has made such an funding. Typically talking, when an organization makes a direct buy or subscription of its personal widespread inventory, it should acknowledge the price of buying such shares as legal responsibility on its stability sheet. To do that, the corporate should establish any money paid out to amass such shares and in addition document any further liabilities created by way of issuance of fairness devices similar to convertible bonds or warrants.

Exterior enlargement is one other technique for accounting for investments in widespread inventory. This normally entails buying one other enterprise with the intention to extend profitability and diversify operations. When exterior enlargement happens, firms must document not solely the price related to buying or merging with different companies, but in addition any prices incurred resulting from restructuring actions (similar to debt refinancing). As well as, they’re required to worth each tangible and intangible belongings acquired by way of this course of. Relying on whether or not goodwill outcomes from these transactions, firms may additionally must take into consideration potential impairment losses related to carrying goodwill on their books.