Look on your Schedule C Worksheet, Line F will indicate which method you used from last years return.
Most taxpayers operate on the Cash Basis of accounting.
The most common method is the Cash method- reporting income in the year actually received it and reporting expenses in the year actually paid.
The Accrual method of accounting is a bit more complicated and is often used by businesses that carry an inventory. Income is reported in the year earned even if not received yet, Expenses are reported as incurred even if not paid yet.
