Cost method is an accounting method in which the investment in common stock is recorded at cost, and revenues are recognized only when cash dividends are received.
In accounting for stock investments of less than 20%, companies use the cost method. Under the cost method,companies record the investment at cost, and recognize revenue only when cash dividends are received.
Companies generally account for treasury stock by the cost method. This method uses the cost of the shares purchased to value the treasury stock. Under the cost method, the company debits treasury stock for the price paid to reacquire the shares.