Quite frequently at the end of a taxable year some uncertainty qualifies the eventual payment or receipt of an obligation. An obligor may refuse to pay the debt for any number of reasons. There may be disagreement as to the amount which is due; the obligation may not appear collectible; or there may be some other contingency which makes eventual receipt or payment appear uncertain at the time. This uncertainty presents a problem to the taxpayer when he closes his books at the end of the year. Should such an uncertain item be entered on the books as income for the present year, or should entry be deferred until some future year when less uncertainty may exist? Has an obligation become sufficiently certain to warrant recognition as an expense or loss incurred in the present year, or should accrual be postponed until it becomes more certain in a future year?
Alfred E. Holland,
ACCRUAL PROBLEMS IN TAX ACCOUNTING,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol48/iss2/2