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.
References in periodicals archive ?
The new tangible property regulations will require most taxpayers to adopt multiple changes in accounting methods for 2014.
964 provide guidance for a foreign corporation's adoption of accounting methods for purposes of determining E&P.
Changing accounting methods to obtain the Liberty Zone bonus depreciation deduction.
This cross-sectional variation in bank debt provisions allows us to examine whether managers who have chosen to change their accounting methods are more likely to make income-increasing changes when the debt contract allows these changes to affect contract calculations.
The revenue procedures both amend existing accounting method change procedures in Rev.
When a corporation changes accounting methods, adjustments must be made to ensure that the change does not result in the omission or duplication of income or expense (Sec.
Like many companies in the retail and restaurant industries, the company is reviewing its lease accounting methods in light of the new clarification of generally accepted accounting principles provided by the Office of the Chief Accountant of the Securities and Exchange Commission on Feb.
If the taxpayer cannot demonstrate reasonable cause for failure to satisfy the above requirements, the computation of E&P should be made as if no elections had been made and any otherwise permissible accounting methods not requiring an election had been adopted.
The Sixth Circuit Court of Appeals recently upheld a Tax Court finding that the consistent omission of a step when computing inventory cost under the dollar-value LIFO method was a change in accounting method rather than a mathematical error.
In many respects, issuing public guidance on involuntary, Service-initiated changes in accounting methods is navigating a course in uncharted waters.
The consistency requirement is often considered more important than the requirement of conformity between the taxpayer's book and tax accounting methods.
In addition, the ruling required taxpayers that had followed the now incorrect interpretation of revenue ruling 76-28 to change their accounting method to follow revenue ruling 90-10.

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