Accrual Accounting Methods for a Cash Basis Business
The cash method of accounting is most commonly used by sole proprietorships and small businesses. In cash accounting, you usually recognize the income when it is received and the expense when the bill is paid out. However, there are some expenses that need to be treated differently.
1. Inventory
If an inventory is necessary to account for your income, you must generally use the cost of goods sold to calculate your purchase cost.
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