Home > West's Encyclopedia of American Law > Accounting

A system of recording or settling accounts in financial transactions; the methods of determining income and expenses for tax and other financial purposes. Also, one of the remedies available for enforcing a right or redressing a wrong asserted in a lawsuit.

Various accounting methods may be employed. The accrual method shows expenses incurred and income earned for a given period of time whether or not such expenses and income have been actually paid or received by that time. The cash method records income and expenses only when monies have actually been received or paid out. The completed contract method reports gains or losses on certain long-term contracts. Gross income and expenses are recognized under this method in the tax year the contract is completed. The installment method of accounting is a way regulated utilities calculate depreciation for