Accounting Method


Also found in: Dictionary, Thesaurus, Wikipedia.
Related to Accounting Method: accrual basis

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.
References in periodicals archive ?
However, if a taxpayer files Form 3115, Application for Change in Accounting Method, for that year, and the taxpayer's NAE method is an issue under consideration for a tax year under examination, then the audit protection of Section 7 of Rev.
Boyle concluded, "the LIFO method has provided for the proper matching of revenues and expenses in the computation of the cost of goods sold and taxable profits, especially in periods of rising prices." Moreover, taxpayers may use LIFO only if their financial accounting treatment of inventory conforms with their tax accounting method. "Raising the taxes of a significant segment of the U.S.
The revenue procedures both amend existing accounting method change procedures in Rev.
The industry directive further cautioned that prior IRS consent was still required for accounting method changes.
The LIFO accounting method for inventories was first permitted in the Revenue Act of 1938 and was quickly extended to all taxpayers in the Internal Revenue Code of 1939.
9, 2002, this nonaccrual accounting method applies only to services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts or consulting--if the taxpayer does not charge interest or a penalty for failure to timely pay the amount charged.
First, note that eligible taxpayers making an accounting method change under Rev.
The taxpayer relied on a provision of the TRA that provided that a change in accounting method to comply with the act could be "treated as made with the consent of the Secretary of the Treasury." The court, however, observed that this provision was not codified.
Observation: A change in accounting method should not be confused with the correction of an error, which is handled on an amended return.
This case illustrates that a change in accounting method for tax purposes is a broader concept than for financial accounting purposes.
Thus, in general, once the accounting method is adopted, the controlling domestic shareholders must follow the method change procedures set forth in either Rev.
* The rapid growth of these markets demands an accounting method that more clearly reflects the underlying philosophy of these purchases.

Full browser ?