Accrual method of accounting

Most businesses have to report income and expenses using accrual method of accounting for income tax purpose. Under accrual method of accounting, you:

  • report your income in the fiscal period you earn it, regardless of when you receive the income; and
  • deduct expenses in the fiscal period you incur them, whether you paid them in that period or not.

incur usually means you either paid or will have to pay the expense.

Accrual accounting versus cash accounting

Additional information