accounting method


A process used by a business to report income and expenses. Companies must choose between two methods acceptable to the IRS, cash accounting or accrual accounting. Cash accounting records income in the year it is received and expenses as they are paid. The accrual method records the income in the year it is earned even though it has not yet been received, and expenses are recorded as they are incurred even if they haven't been paid.

See also: List of Key Accounting Terms and Definitions at

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accounting interpretation accounting period