accounting method

An accounting method is a consistent approach a business uses to record and report its financial transactions. It determines how and when income and expenses are recognized, affecting financial statements and tax obligations. The two main methods are cash basis, where transactions are recorded when money changes hands, and accrual basis, where transactions are recorded when they are earned or incurred, regardless of payment. Choosing the right method ensures accurate financial reporting and compliance with tax laws, and it reflects the business’s financial health in a way that aligns with its operations and goals.