The Grass Doctor

Should I use the cash or accrual method?

Previously, I was engaged in lawn care, and did all my accounting using cash. I am switching to real estate sales (realtor) and think I might possibly engage in property management at some point in the future. Would it make any sense for me to use accrual method? I don't see where I would ever be selling a product, maintaining inventory, etc. so I plan to use cash, but want to double check before I go ahead and start keeping books that way.

Public Comments

1. The cash basis taxpayer method is the simplest and is used by most ordinary taxpayer. You report income when your receive and your ordinary and necessary business expense when you pay them. This will be your final decision that you will have to make your self.
2. the accrual method requires considerably more control through your bookkeeping when you invoice someone, you declare the income altho you don't have the money until it is paid at a later date that means you post your income to an Unearned income account and when it is paid that account is then credited this really results in a lot more work than merely reporting your income as you receive it(one entry) the same with your expenses, you may charge something for expense and charge that to an expense account but you have a liability account that remains there until you pay for it some feel that accrual results in a more precise method of your profit and loss but it is also more cumbersome and in the businesses you are considering it probably would not be that much more accurate for you
3. Use the cash method. It is much simpler and there is no requirement for you to use the accrual method for any enterprise you have suggested.
4. There is no good reason for you to use accrual accounting. It would just complicate your life.
5. The accrual method is required for any business that involves real estate sales. However, if you are classified as a "small business taxpayer" and you have average annual gross receipts of $1 million or less for any prior three-year period, you are excepted from the requirement to use the accrual method, and can use the cash method instead. If your average gross receipts are more than $1 million and less than $10 million, you can use cash method instead of the required accrual method if, regardless of the principal business activity (real estate sales), you may use the cash method with respect to any secondary business activity (property management) that mainly provides services, and is neither retailing nor manufacturing.
6. it would be easier to use the cash method. why would you need to pay taxes on income you may not receive?