On December 1, 2016, Daniel, an accrual basis taxpayer, collects $12,000 rent for December 2016 and $12,000 for January 2017. Daniel must include the $24,000 in 2016 gross income.

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Quizplus · Accepted Answer

According to the accrual basis of accounting, income is recognized when it is earned, regardless of when payment is received. In this case, Daniel earned the rent for both December 2016 and January 2017 on December 1, 2016, so he must include the entire $24,000 in his 2016 gross income.

On December 1, 2016, Daniel, an Accrual Basis Taxpayer, Collects