accounting method.A system for determining income and expenses for tax purposes.
accrual accounting method (<<schwa>>-kroo-<<schwa>>l). An accounting method that
records entries of debits and credits when the liability arises, rather than when the income or
expense is received or disbursed. — Also termed accrual basis. Cf. cash-basis accounting method.
[Cases: Internal Revenue 3099; Taxation 1078. C.J.S. Internal Revenue §§ 25, 46, 57, 371;
Taxation § 1759.]
capitalization accounting method.A method of determining an asset’s present value by
discounting its stream of expected future benefits at an appropriate rate.
cash-basis accounting method.An accounting method that considers only cash actually
received as income and cash actually paid out as an expense. Cf. accrual accounting method.
[Cases: Internal Revenue 3100; Taxation 1078. C.J.S. Internal Revenue §§ 25, 44, 56; Taxation
completed-contract accounting method.A method of reporting profit or loss on certain
long-term contracts by recognizing gross income and expenses in the tax year that the contract is
completed. [Cases: Internal Revenue 3101; Taxation 1078. C.J.S. Internal Revenue §§ 21,
24–26; Taxation § 1759.]
cost accounting method.The practice of recording the value of assets in terms of their cost. —
Also termed cost accounting.
direct charge-off accounting method.A system of accounting by which a deduction for bad
debts is allowed when an account has become partially or completely worthless.
equity accounting method.A method of accounting for long-term investment in common
stock based on acqui-sition cost, investor income, net losses, and dividends.
fair-value accounting method.The valuation of assets at present actual or market value.
installment accounting method.A method by which a taxpayer can spread the recognition of
gains from a sale of property over the payment period by computing the gross-profit percentage
from the sale and applying it to each payment. [Cases: Internal Revenue 3104; Taxation 1078.
C.J.S. Internal Revenue §§ 47–50; Taxation § 1759.]
percentage-of-completion method.An accounting method in which revenue is recognized
gradually during the completion of the subject matter of the contract.
physical-inventory accounting method.A method of counting a company’s goods at the close
of an accounting period.
purchase accounting method.A method of accounting for mergers whereby the total value
paid or exchanged for the acquired firm’s assets is recorded on the acquiring firm’s books, and any
difference between the fair market value of the assets acquired and the purchase price is recorded
as goodwill. [Blacks Law 8th]