This year R opened a retail shoe store, Shoe Jamboree.The business has less than $10 million in gross receipts.Even if the business adopts the cash method of accounting, it is still required to use the accrual method to account for purchases and sales of inventory.

Question

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According to the IRS, businesses with average annual gross receipts of less than $10 million can use the cash method of accounting for tax purposes. However, if the business maintains an inventory, it must use the accrual method to account for purchases and sales of inventory, regardless of its overall accounting method. Therefore, Shoe Jamboree must use the accrual method for inventory even if it adopts the cash method for other transactions.

This Year R Opened a Retail Shoe Store, Shoe Jamboree