What are the three methods for reporting gross income?

The three methods for reporting gross income that are widely recognized in tax accounting are the cash method, accrual method, and installment method.

The cash method recognizes income when it is actually received and expenses when they are paid, making it straightforward for many small businesses and individuals as it aligns closely with actual cash flow. This method is often preferred by those who want simplicity in tracking income and expenses.

The accrual method, on the other hand, recognizes income when it is earned and expenses when they are incurred, regardless of when cash transactions occur. This method provides a more accurate picture of financial health over time, as it accounts for receivables and payables, and is typically used by larger businesses or those that carry inventory.

The installment method is specifically used in transactions where income is recognized as payments are received over time, such as in the sale of property. This method helps taxpayers manage tax liabilities in years when income would otherwise be unexpectedly high due to large one-time payments.

The other choices do not correctly identify established accounting methods for income reporting. For example, the loan and investment methods mentioned in one option do not pertain to how income is recognized and reported under tax law. Similarly, terms like "advance method" and "tax credit method