Which of the following taxpayers is required to use the accrual method of accounting?
A)A retail business with average annual gross receipts of $800,000.
B)A medical doctor with average annual gross receipts of $2 million.
C)An insurance agency with average annual gross receipts of $2 million.
D)All of these are required to use the accrual method.
E)None of these is required to use the accrual method.

Question

Quizplus · Accepted Answer

Generally,sales and cost of goods sold for a retail business must be reported by the accrual method because inventories are material.However,for option a. ,the small business exception applies.Therefore,the retailer in option a.can use the cash method.The cash method can be used in options b.and c.because the medical doctor and insurance agency are service entities.

Which of the Following Taxpayers Is Required to Use the Accrual