Generally, if an individual produces, purchases, or sells merchandise in their business, they must keep an inventory and use the accrual method for purchases and sales of merchandise. However, certain qualifying small business taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. A qualifying small business taxpayer is defined as:
Question 21Select one:
a.
A business that has annual revenues of less than $100,000 in the latest completed tax year
b.
A business that employs fewer than 10 people
c.
A business that has average gross receipts of $26 million or less within the three prior tax years
d.
A business that has five year average annual gross receipts for each prior tax year ending on or after December 31, 2000, of more than $500,000 but not more than $10 million