In accounting why liquidating is declaired

Dividends from investments recognized under the equity method do not constitute investment income, instead they reduce the carrying value of the investment.

This procedure is usually used when the shareholders of a company wish to retire, realise their investment or where the company is surplus to requirements.In the cash flow statement, any receipts are recognized net cash flows from operating activities. Accrual of interest income depends on the characteristics of the debt instrument.For example, in case of non-amortizing loans and conventional bonds, interest income equals the product of principal amount and the periodic interest rate.Further, companies invest in equity and debt securities of different companies from different sectors of the economy to diversify sources of its net income.There are also strategic reasons to make investment in other companies, for example to acquire a subsidiary to secure its major inputs such as raw material, to acquire an innovative new technology or patents, etc.

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