The cash method of accounting is another name for the cash basis of accounting, the approach that records revenue only when cash is received and expenses only when cash is paid out. It ignores when a sale was earned or a cost was incurred. A full explanation of the method, its advantages and its limits is in the entry on the cash basis.
Where the name is used
"Cash method" is the standard wording in US tax practice. The Internal Revenue Service treats the choice between cash and accrual as a choice of accounting method, and many sole traders, freelancers and small partnerships use the cash method when filing their tax returns because it is simple and taxes income only when money actually arrives. Larger businesses, and those that must keep inventories, can face limits on using it for tax.
In financial reporting, the more common phrase is cash basis, and its counterpart is the accrual basis of accounting, also called the accrual method of accounting. Financial statements prepared under GAAP or IFRS must use the accrual approach, because cash-based results can make a business look more or less profitable in a given month simply because of when bills were paid or collected.
Some small businesses use a hybrid, keeping books on a cash basis day to day and converting to accrual figures at year end for lenders or investors.