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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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38% - Moderately

Accounting Method


Synonyms:book keeping method
Filed Under: financial-banking
Tags: banking
 

Definition of accounting method

accounting method
1. Accounting method refers to how individuals or businesses keep their financial records. A common accounting method for both individuals and small businesses is the cash method, even though businesses with inventory are required to use the accrual method.

Related Terms and Acronyms:

  • accrual method   Business accounting in which you report income in the year you earned it and expenses in the year you incur them, rather than reporting income and expenses when you receive payment or when you pay the expenses. Under this method, if you built a deck and billed the client in December 1999, the amount you charged would be reported in 1999 as income even if you didn't get the payment until January 2000. If you own a business that maintains an inventory, you are required to use the accrual method.
  • cash method   The form of accounting in which you report income in the actual year you receive it and deduct expenses in the year you pay. Most individuals use this method. Under this system, if you built a deck and billed the client in December 1999 but didn't receive the cheque until January 2000, it would be counted as 2000 income, not 1999.
  • interest-crediting methods   A number of methods used to establish how interest is accrued, owed and dispersed to the parties due.

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