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.