accrual method

Accrual Accounting

A system of accounting that recognizes revenue and matches it with the expenses that generated that revenue. Unlike other systems of accounting, which recognize revenue and expenses in the order in which they are received, the accrual accounting convention ignores the function of time and only considers what expenses generate what revenues, even if payments have not actually been made. Companies with inventories are required to use the accrual method for tax purposes.

accrual method

An accounting method in which income is counted when it is earned (whether you receive the money at that time or not) and expenses are counted when incurred (whether you pay the bill at that time or not). It is the opposite of the cash method, in which income is counted when money is received and expenses are counted when the bills are paid.Most businesses use the accrual method because it allows income,and the expenses associated with generating that income, to be accounted for in the same period. (Many small businesses use the cash method because it's easier.)

References in periodicals archive ?
In this case, the borrower still incurs a liability that enables the borrower to deduct the interest under the accrual method.
Accrued means tax actually payable based on reported income, not tax based on income a corporation would include if it reported all items of income and deductions under the accrual method.
The company's previously reported operating income for 1992 will decrease by approximately $5 million per quarter, reflecting the higher cost levels associated with the newly required accrual method.
Respondents identified the following major obstacles to the implementation of a business information return program: (1) the use of fiscal-year ends by payees, (2) the use of the accrual method of accounting by payees, and (3) the receipt of information returns by subsidiaries or affiliates that relate to income reported on the parent company's income tax return.
TSX:FTS) today received approval from the Newfoundland and Labrador Board of Commissioners of Public Utilities (the "Public Utilities Board") to change its accounting policy for revenue recognition from the billed method to the accrual method effective January 1, 2006.
461 for a taxpayer using an accrual method of accounting.
446-1(c)(2)(i) says a taxpayer must use the accrual method for purchases and sales if he or she is required to account for inventories under IBC section 471.
Financial Accounting Standard 106 requires companies to account for the cost of medical and other postretirement benefits excluding pensions using the accrual method of accounting during the working lives of its associates.
A cash-based computation of income is not, however, a more accurate measure of income than the accrual method already employed by taxpayers.
In regard to financial results, as previously disclosed in the annual or quarterly reports filed for the Relevant Periods, THK has recognized revenues from its SEE business segment at WebSourced in the period that they are deemed to be earned and collectible under the accrual method of accounting using the proportional performance model.
X, a corporation, uses an accrual method of accounting and files its Federal income tax returns on a calendar-year basis.
In Chief Counsel Notice CC-2001-010, the IRS announced a change in its litigation position that certain taxpayers must use the accrual method of accounting.