What method recognizes income and expenses only when money is received or paid?

The cash basis method is recognized for accounting purposes because it records income and expenses strictly at the point when cash is exchanged. This means that revenue is recognized only when cash is actually received, and expenses are recorded only when cash is paid out. This approach is straightforward and often favored by small businesses for its simplicity, as it closely aligns with cash flow and provides a clear picture of cash on hand.

In contrast, the accrual method recognizes income when it is earned, regardless of when the cash is received, and expenses when they are incurred, even if the payment has not yet been made. This method can provide a more accurate picture of a company's financial performance over time but is more complex. The PCM Method and the cost-comparison method are not standard accounting terms used for the recognition of income and expenses in this context, making them less relevant when discussing cash flow and accounting methodology.