In which accounting method is income recognized when services are provided?

The accrual method of accounting recognizes income when services are provided, regardless of when payment is actually received. This approach aligns revenue recognition with the delivery of services or goods, reflecting the economic activity at the time it occurs rather than when cash changes hands.

Under this method, a contractor who completes a job and sends an invoice will recognize the income at that time, even if the client pays later. This allows for a more accurate representation of a business's financial health and performance over a specific accounting period, as it provides a clearer picture of income earned and expenses incurred during that period.

In contrast, the cash basis accounting recognizes income and expenses only when cash is exchanged, which can lead to discrepancies in financial reporting. The modified accounting method combines elements of the accrual and cash methods, and deferred payment accounting does not specifically pertain to the timing of income recognition based on service provision.