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Inventory Rule Exception

The general rule is clear: if your business has an inventory of items for sale, you generally must use an accrual method of accounting. This rule can feel restrictive to small business owners who prefer the simplicity of the Cash Method. The either/or dilemma is between following the general rule or finding a permissible exception.

There is an important exception: Certain small business taxpayers may be able to use the cash method even if they have inventory. These taxpayers can account for their inventory items as materials and supplies that are not incidental. This both/and nuance is a great example of educational generosity—providing complex information simply. For more detailed information, the IRS directs business owners to Publication 538.

Ready to simplify your bookkeeping and choose the right method for your business from day one? Read more on this topic by visiting https://www.safesimplesound.com/guide-to-business-accounting-methods-cash-vs-accrual/.

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DISCLAIMER: This content is for educational purposes only and should not be considered personalized financial advice. Always consult with a qualified financial professional before making financial decisions.

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