AICPA Raises Concerns About Cash Accounting Restriction 

Published September 05, 2013

The Bureau of National Affairs (BNA) reported that two approaches to accounting – accrual and cash – are going head-to-head in Congress’s overhaul of the Internal Revenue Code, and the outcome could have a big impact on certain types of businesses.

Professional services businesses such as engineering and accounting firms, as well as farms, are pushing for greater use of the cash method of accounting, which counts income when it is actually received and expenses when they are actually paid. A House Ways and Means Committee proposal would allow all sole proprietorships, as well as firms with less than $10 million in gross receipts, to use cash accounting, which the committee said would expand and simplify cash accounting for small businesses.”

According to BNA’s Marc Heller, “…the American Institute of CPAs said the proposal would impose accrual accounting on some partnerships, S corporations, farms and personal services corporations, most of which have been allowed to use cash accounting regardless of gross receipts as long as they do not hold inventory.”

The AICPA believes that Congress should not further restrict the use of the longstanding cash method of accounting for the thousands of U.S. businesses that use it, the institute wrote in a letter to Ways and Means Chairman Dave Camp and Rep. Sander Levin, the panel’s top Democrat.


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