What type of accounting method records revenues and expenses when they are incurred, regardless of cash flow?

Accrual Basis Accounting is the method that recognizes revenues and expenses when they are incurred, which means that transactions are recorded in the accounting period in which they occur, regardless of when cash is actually exchanged. This approach provides a more accurate picture of a company's financial performance and position during a specific period because it accounts for all economic events that have occurred.

For instance, if a company provides services in December but does not receive payment until January, the revenue would still be recognized in December under the accrual basis. Similarly, expenses are recorded when they are incurred. This method aligns income with the expenses incurred to generate that income, allowing for a better matching of revenues and expenses, which is a fundamental principle in accounting.

The other methods listed, like Cash Basis Accounting, track revenues and expenses only when cash is exchanged, which does not reflect true financial performance over a particular period. Hybrid Accounting and Modified Cash Basis Accounting combine aspects of both accrual and cash basis methods, but they don't fully embrace the principle of recognizing revenues and expenses at the time they occur, regardless of cash flow.