Jim operates his business on the accrual method, and this year, he received $4,000 for services that he intends to provide to his clients next year. Under what circumstances can Jim defer the recognition of the $4,000 of income until next year?
A)Jim can defer the recognition of the income if he absolutely promises not to provide the services until next year.
B)Jim must defer the recognition of the income until the income is earned.
C)Jim can defer the recognition of the income if he has requested that the client not pay for the services until the services are provided.
D)Jim can elect to defer the recognition of the income if the income is not recognized for financial accounting purposes.
E)Jim can never defer the recognition of the prepayments of income.

Question

Quizplus · Accepted Answer

Under the accrual method, income is generally recognized when earned. However, Jim can elect to defer the recognition of income for tax purposes if it is not recognized for financial accounting purposes, according to IRS guidelines.

Jim Operates His Business on the Accrual Method, and This