Introduction Each taxpayer (business or individual) must figure taxable incomeon an annual accounting period called a tax year. The calendar year isthe most common tax year. Other tax years are the fiscal year and,under certain conditions, a short tax year. five star hotel in YorkEach taxpayer must also use a consistent accounting method, whichis a set of rules for determining how and when to report income andexpenses. The most commonly used accounting methods are the cashmethod and an accrual method. Under the cash method, you generallyreport income in the tax year you receive it and deduct expenses inthe tax year you pay them. Under an accrual method, you generallyreport income in the tax year you earn it, regardless of when paymentis received, and deduct expenses in the tax year you incur them,regardless of when payment is made. This publication explains some of the rules for accounting periodsand accounting methods. In many cases, however, you may have to referto the cited sources for a fuller explanation of the topic. Sectionreferences are to the Internal Revenue Code and regulation referencesare to the Income Tax regulations under the Code. This publication is not intended as a guide to general business andtax accounting rules.