The accrual method generally is required to report income for which of the following types of businesses:
A)From long-term construction contracts.
B)Earned by an incorporated public accounting firm with gross receipts in excess of $5 million.
C)Earned by a partnership that has a partner that is an S corporation.
D)A grocery store with average annual gross receipts of $800,000.
E)None of these.

Question

Quizplus · Accepted Answer

Answer a.is not true because contractors may be permitted to use the completed contract method,cash method (small contractors),or the percentage of completion method.Answer b.is not true because a public accounting firm is a personal services corporation,which is exempted from the accrual basis requirements for C corporations.Answer c.is not true;however,if the corporation revokes the S election and becomes a C corporation,the partnership would be required to use the accrual method.Answer d.is not true because the grocery store is eligible for a small business exception to the general rule that the accrual basis must be used where inventories are an income-producing factor.

The Accrual Method Generally Is Required to Report Income for Which