<\/a>Small businesses, those that have a total annual income turnover of less than $10 million, can use the simplified depreciation rules. They can also use the cash method of accounting, rather than the accrual method, for calculating the profit or loss each year.<\/em><\/p>\nUnder the cash method a business only pays tax on income it receives, and only claims a tax deduction for expenses paid. Under the accrual method a business accounts for all income it earns in an accounting period, and claims a deduction for all costs that have been incurred or are owed.<\/em><\/p>\nBusinesses that want to accurately monitor their performance should use the accrual method of accounting for management purposes, but if they qualify as a small business can use the cash method for income tax purposes.<\/em><\/p>\nWhen it comes to accounting for the cost of assets, and the owners of the business want to accurately reflect the write-off of those assets against the income, the cost should be claimed over the expected useful life of the assets.<\/em><\/p>\nJust as a small business can use the accrual method for management purposes, and the cash method for income tax purposes, an eligible small business can use the useful life method for management purposes and the simplified depreciation small business asset pool method for tax purposes.<\/em><\/p>\n