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.
You must make these accounting method decisions specifically for bonds prior to Dec.
964 provide guidance for a foreign corporation's adoption of accounting methods for purposes of determining E&P.
A taxpayer may generally choose any permitted accounting method (see Chapter 10) when filing the taxpayer's first tax return.
We believe taxpayers deserve finality in respect of their accounting methods. If ruling protection is not to be accorded to taxpayers as a result of filing an application for a change in method under the standard consent process, then, at a minimum, ruling protection should be accorded either upon examination of the change in method or upon the running of the statute of limitations for the year of change.
Such products are priced on the assumption that they will earn a higher return than the "risk-free rate"--the rate on government bonds--but under a fair-value accounting method, they would likely be marked to market at the risk-free rate, lower than their assumed value, said Doll.
To provide evidence on how debt contracts affect the sign of voluntary changes that borrowing firms make in their accounting methods, we identify a sample of borrowers with material bank debt who have chosen to make accounting changes.
Yet even if there is no perfect accounting method, that doesn't mean we can't start asking the right questions.
One option is to examine the various accounting methods that they are using--not just the overall method of accounting (cash or accrual), but the specific accounting methods or elections available to certain items or issues.
An accounting method affects when an item of income or deduction is recognized.
Taxpayers have some latitude when choosing an accounting method as long as the method clearly reflects income.
A taxpayer's accounting methods determine the time for reporting income and expenses.