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Accrual Method of Accounting

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Accrual Method of Accounting
One of the two most common methods of accounting, the other being the cash method. Under the accrual method of accounting, income is reported in the tax year earned, whether or not received, and deductions are claimed in the tax year incurred, whether or not paid.


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451-1(a) includes income in gross income under an accrual method of accounting when (1) all the events have occurred that fix the right to receive the income and (2) the amount can be determined with reasonable accuracy.
The accrual method of accounting is the "correct" way to compile your financial statements.
Finally--and perhaps of greatest import--it turns out that the accrual method of accounting for future expenses is theoretically inferior to the cash method.
 
 
 
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