Cash Versus Accrual Accounting Methods

The provided text from Expert-Tax explains two fundamental accounting methods for reporting business income: cash basis and accruals basis. The cash basis recognizes income when payment is received, regardless of when the work was done. Conversely, the accruals basis recognizes income when it is earned, irrespective of when the payment is collected. An example involving a plumber illustrates the differing timelines for income recognition under each method.