When is income reported under the Cash Method Accounting?

Income is reported under the Cash Method Accounting when it is actually received. This accounting method recognizes revenue when cash is in hand rather than when it has been earned. Therefore, if a contractor completes a job but has not yet received payment, that income is not recorded until the payment is made. This approach allows for a straightforward tracking of cash flow, as income is only acknowledged once it is secured. This method contrasts with the Accrual Method, which recognizes income when it is earned, regardless of when the cash is received.

The other answers do not align with the Cash Method criteria. Reporting income in the year it is generated reflects the principles of accrual accounting, which mismatches with cash accounting. Reporting income when expenses are paid or at the end of the financial year does not accurately capture the principles of how cash income should be recognized, since these do not directly relate to when cash is received.