How does the text relate the deductibility of expenses to the accrual method?
Understand the Problem
The question is asking how the deductibility of expenses is connected to the accrual method of accounting. It seems to be assessing knowledge on tax accounting principles, specifically how expenses are treated differently under various accounting methods.
Answer
Expenses are deducted in the year incurred under the accrual method.
Under the accrual method, expenses are deductible in the tax year they are incurred, even if no payment has been made. The deduction is allowed once the expense is fixed and there are no contingencies affecting it.
Answer for screen readers
Under the accrual method, expenses are deductible in the tax year they are incurred, even if no payment has been made. The deduction is allowed once the expense is fixed and there are no contingencies affecting it.
More Information
In accrual accounting, the timing of actual cash transactions does not affect the recording and deduction of expenses; they are based on when obligations are fixed and determinable.
Tips
A common mistake is confusing the accrual method with the cash method, where deductions occur only when payments are made.
Sources
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