Tax Analysts provides news, analysis, and commentary on accounting periods and methods, including permissible methods of accounting described in section 446. These include cash method accounting and accrual method accounting. In cash basis accounting, income is recognized when received and expenses are deducted when paid. For accrual basis accounting, inclusions of income and deductions for liabilities occur when they can be determined reasonably accurately and all events required to fix the rights and liabilities have happened. Under section 448, Limitation on use of cash method of accounting, many business entities face restrictions on their ability to use cash method accounting.

Under section 451, the year of inclusion for an item of income is generally the year in which income is received. Section 461 determines the year of deduction. An installment sale using the installment method of accounting is treated differently if it qualifies under section 453. An installment sale requires at least one payment for some property to be received in a later year as part of the sale.

Inventories are subject to special accounting rules under section 471. One of these rules is last-in, first-out ("LIFO") accounting as provided by section 472. LIFO accounting allows application of the most recently purchased inventory item's basis to the most recent inventory item sale.

Changes in method of accounting are governed by section 481. A taxpayer changing accounting method generally must file Form 3115, "Application for Change in Accounting Method." Taxpayers may also be subject to automatic accounting method change.

Tax Analysts provides documents, news stories, and commentary on accounting periods and methods. To stay up to date on all tax-related topics, subscribe to Tax Notes Today Federal.