IRS Publication 538

Definition of 'IRS Publication 538'


A document published by the Internal Revenue Service (IRS) that details the different commonly recognized accounting methods. The IRS requires taxpayers to use a consistent accounting method when reporting income. All income, regardless of source or type of taxpayer (individual or business), is reported according to a tax year.

Investopedia explains 'IRS Publication 538'


The most common accounting methods are cash accounting and accrual accounting. The cash method of accounting has the taxpayer report income in the year that it was received, while the accrual method has the taxpayer report income in the year that income was earned, although it may not be received during that tax year.

If a calendar year is adopted as the filing year it must continue to be used even if the taxpayer incorporates, enters a partnership or becomes a sole-proprietor. Special permission must be granted by the IRS to change the filing schedule.



comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by additional investment would not warrant the expense. A harvest strategy is employed when a line of business is considered to be a cash cow, meaning that the brand is mature and is unlikely to grow if more investment is added.
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer to government spending rather than business or individual spending. When referring to accrued federal government deficits, the term "national debt” is used.
Trading Center