The most common hybrid accounting method is a combination of cash and accrual. Generally, this combination is used when inventory is an income-producing factor. To simplify recordkeeping, a taxpayer accounts for inventory using accrual and uses the cash method for all other income and expense items.

Income that hasn’t actually been received is taxed as though received (constructive receipt). Accrual is allowed for sales and purchases, cash for operating expenses. However, if the cash method is used for sales and purchases, then it must also be used for expenses.