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Why should I use the accrual method?

The purpose of the accrual method is to match income and expenses in the correct year. With given method, income is reported on the year earned and expenses are deducted in the year incurred. 

Income should be reported as early as: when payment is received, when the income is due, when the income is earned, or when a title has passed. However, expenses should be deducted or capitalized when they become a liability, whether or not paid in the same year. 

It is important that if a business has inventory, they must use this method. 


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