Which income reporting method records income when it is earned but not necessarily received?

The accrual method is the correct choice because it recognizes income at the point it is earned—meaning when the goods or services have been delivered—regardless of whether the cash has been received. This method aligns with the matching principle, which states that revenues should be matched with the expenses incurred to generate them in the same period.

For instance, if a company provides a service in December but receives payment in January, under the accrual method, the income is recorded in December when the service was performed. This approach helps give a more accurate depiction of a company's financial position and operational performance over time, as it captures all transactions that have occurred within a specific accounting period, regardless of cash transactions.

In contrast, the cash method only records income when cash is received, disregarding when the income was actually earned. The other options, such as the exchange and reporting methods, are not standard accounting terms related to the manner in which income is recognized, making them incorrect in this context.