[Verse 1]
Sarah runs her bakery, cash in hand each day
Records income when received, expenses when she pays
But Tommy's corporation with receipts beyond sixteen million
Must use accrual method, no choice in his decision
[Chorus]
Cash flows in, cash flows out, simple as can be
All events test, economic performance, accrual's complexity
Four-eight-one adjustments when you need to make a change
Calendar or fiscal year, installments can arrange
[Verse 2]
All events test asks three questions, is the liability fixed and clear?
Can you calculate the amount? Did it happen this tax year?
Economic performance adds another layer deep
Services performed, property provided, payments you must keep
[Chorus]
Cash flows in, cash flows out, simple as can be
All events test, economic performance, accrual's complexity
Four-eight-one adjustments when you need to make a change
Calendar or fiscal year, installments can arrange
[Verse 3]
When you switch accounting methods, section four-eight-one's the key
Positive adjustment spreads four years, prevents duplicity
Negative adjustment takes immediate deduction
Smoothing out the bumps between the old and new construction
[Bridge]
Partnerships and S-corps follow owners' calendar ways
C-corps pick their fiscal year, December thirty-one stays
Personal service corporations can't escape the calendar trap
Required tax years keep them all within the same year's map
[Verse 4]
Installment sales can spread the gain across the payments made
Section four-sixty contracts use percentage-of-completion grade
Long-term contracts over two years with substantial completion time
Matching income with the work through each accounting rhyme
[Final Chorus]
Cash flows in, cash flows out, timing makes it clear
All events and economic tests determine accrual's year
Section four-eight-one smooths changes, tax years must align
Master these four methods and your accounting knowledge shines