Which accounting method is used to record income at the time it is earned?

The accrual method is used to record income at the time it is earned, which means that revenue is recognized when the services are performed or goods are delivered, regardless of when the payment is actually received. This method provides a more accurate picture of a company's financial position because it aligns income and expenses in the period they are incurred, giving a clearer view of the business's profitability.

In contrast, the cash method records income only when cash is received, which can lead to discrepancies between actual performance and reported income since it does not match revenues with the related expenses incurred in the same period. The hybrid method combines elements of both cash and accrual methods, but it does not specifically focus on recognizing income when earned in the same manner as the accrual method. The deferred method typically relates to postponing income recognition until a future date, which is contrary to the principle of recognizing income when it is earned.

Therefore, the accrual method is the preferred accounting method for businesses that seek to accurately reflect their financial status and performance by recognizing income at the time it is earned.