As opposed to “Cash method” or “Cash basis,” a method of accounting applied for tax purposes. The method of tax accounting used determines when a transaction has significance for tax purposes. Under the accrual method, a transaction is taxed when the taxpayer “accrues” an obligation to pay or a right to receive a payment is created. In the case of a service business, for example, income tax would be payable in the year during which services are rendered, as opposed to the year when payment is actually made (as would be the case under the cash method). The accrual method is used by most businesses. Smaller businesses use the cash method.