How Does My Accounting Method Affect Year-End Tax Planning?
How Does My Accounting Method Affect Year-End Tax Planning? The accounting method you choose (cash or accrual) affects your year-end tax planning activities, and the timing of income and expenses. First, a brief review of these accounting methods, then a discussion of how they each affect year-end transactions.Answer: Cash vs. Accrual Accounting In cash accounting, income and expenses are recognized as transactions when money changes hands. If you receive a bill, it only counts as an expense when you actually pay it, and income is counted only when you actually receive the money. In accrual accounting, the transaction must be counted when it is established. For example, if you send someone a bill for your services, you count the income from the date of the bill. In accrual accounting, you count an expense when you receive the bill. Year-En
