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Cash vs. Accrual Accounting: Which Method Will Benefit Your Business Most?

ARTICLE | December 06, 2024

Authored by Vasquez + Company


Choosing the right accounting method can significantly impact your business's tax strategy. This article discusses the pros and cons of the cash and accrual accounting methods, how the Tax Cuts and Jobs Act (TCJA) has expanded eligibility for the cash method, and key factors businesses should consider when selecting the best approach.

Key Points:

  • Cash Method Advantages: Greater flexibility in timing income and deductions, potential tax deferral opportunities, and better cash flow management.Accrual
  • Method Benefits: Ideal for businesses with more complex financial structures or where income is recognized before cash receipts.
  • TCJA Changes: The TCJA raised the eligibility threshold for small businesses to use the cash method, providing expanded tax benefits.
  • Switching Methods: Consider administrative costs and IRS approval when changing accounting methods.

For more detailed insights, read the full article here.

 

Our firm provides the information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. This article is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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