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Count It Up

. . . if you can. New and confusing IRS accounting rules may leave you puzzled.

This story appears in the December 2000 issue of Entrepreneur. Subscribe »

Federal tax rules are never simple, even when they're designed to be. That's the conclusion many entrepreneurs have arrived at since checking out a new IRS accounting change.

Under this new revenue procedure, businesses with more than $1 million in revenue are required to use the accrual method of accounting and maintain inventories of purchases and merchandise sales. The previous tax code offered different guidance. It said that businesses with up to $5 million in sales were allowed to use the much simpler cash method of accounting as long as the business did not have inventory.

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