Adam D:  The practices that you have between you and your vendors/customers is solely up to your discretion/agreement. If your vendor says that you have to pay the entire balace of an invoice at the due date, arguing theoretical accounting practices won't work. Whether or not you are an accrual or cash taxpayer is the only difference it will make to the government. Just be careful, changing between accounting methods does raise a red flag with the IRS. Basically the difference between cash and accrual is the following: Cash: You earn and expense only on those things that you have actually received payment for or those things you've actually paid. Accrual: You earn and expense on those things that you've either billed or been billed for. Example: Your December 2006 phone bill isn't due until January 10, 2007. This is a 2006 expense since the bill is for charges accrued during 2006, regardless of when you pay it.
2006-10-16 10:09:37