Under the cash method of accounting, taxpayers recognize income in the period they actually receive the cash, rather than when they earn it. This means income is recorded when the payment is received, not when the invoice is sent or the service is performed. Similarly, expenses are recognized when they are paid, not when they are incurred. This method tracks the actual flow of cash into and out of the business, providing a straightforward way to manage and report income and expenses, often used by small businesses and freelancers for simplicity. For example, if a service is completed in June but payment is received in July, the income is recognized in July under the cash method. This method allows more control over when income and expenses are reported for tax purposes as they align with actual cash transactions, not accrued amounts.