What is ACCRUAL BASIS? Definition of ACCRUAL BASIS in Black's Law Dictionary
A method of keeping accounts which shows expenses incurred and income earned for a given period, although such expenses and income may not have been actually paid or received in cash. Orlando Orange Groves Co. v. Hale, 119 Fla. 159, 161 So. 284.
Right to receive and not the actual receipt determines inclusion of amount in gross income. When right to receive an amount becomes fixed, right accrues. H. Liebes & Co. v. Commissioner of Internal Revenue, C.C.A.9, 90 F.2d 932, 937. Obligations payable to or by taxpayer are treated as if discharged when incurred. H. Liebes & Co. v. Commissioner of Internal Revenue, C.C.A.9, 90 F.2d 932, 936. Entries are made of credits and debits when liability arises, whether received or disbursed. Insurance Finance Corporation v. Commissioner of Internal Revenue, C.C.A.3, 84 F.2d 382. Books showing sales by accounts receivable and purchases by accounts payable, and set up inventories at beginning and end of year. Consolidated Tea Co. v. Bowers, D.C.N.Y., 19 F.2d 382.
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