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Accounting Method

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Accounting Method
Any system of accounting that uses a unique way for recognizing revenue and earnings. An accounting method reports revenue and earnings differently from other methods in order to assure that every company pays the appropriate amount in taxes. Two major accounting methods are accrual accounting and cash accounting. Accrual accounting recognizes revenue and matches it with the expenses that generated that revenue. Cash accounting, on the other hand, recognizes revenue and expenses in the order in which they are received or created. Regulations require different companies to use different accounting methods; for example, companies with inventories are required to use the accrual method.

Accounting Method
The method under which income and expenses are determined for tax purposes. Major accounting methods are the cash method and the accrual method.


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It also states that although an accounting method may exist without a pattern of consistent treatment of an item, in most instances, consistent treatment of such item will be considered an accounting method.
On behalf of Tax Executives Institute (TEI), I am writing to urge that the Last-In, First-Out (LIFO) inventory accounting method be retained as part of the Internal Revenue Code.
The IRS audited the 1996 and 1997 returns and issued a deficiency notice, asserting Brookshire had to reduce its MACRS deductions for those years because it had changed its accounting method without obtaining prior consent.
 
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