Question

Cheyanne is a sole proprietor using the cash method of accounting. When will she report her income?
When bad debts are deducted.
When income is actively or constructively received.
When merchandise is shipped to the buyer.
When her services are rendered but not paid.

Answer 1

When income is actively or constructively received.

Under the cash method, a taxpayer reports income when cash (or its equivalent) is actually received or is constructively received (made available without substantial restrictions), not when services are performed or goods are shipped.