The __________ is an accounting method used to recognize revenue when it is earned.

The accrual basis is the accounting method that recognizes revenue when it is earned, regardless of when the cash is actually received. This approach aligns revenue recognition with the completion of the earnings process, meaning revenue is recorded when a product or service has been delivered to the customer and the business has a right to receive payment.

This method is particularly important for businesses that extend credit to customers or provide services over time, as it gives a more accurate picture of a company's financial performance within a given period. By adhering to this principle, businesses can make informed decisions based on all earned income, rather than just the cash that has come in during a specific time frame.

Other choices such as the cash basis, which records revenues and expenses only when cash changes hands, would not accurately reflect the timing of when revenue is earned. Deferred revenue refers to payments received before services are performed or goods delivered, which does not represent revenue at the time it is earned. Expense recognition, while related to accounting methods, specifically pertains to recording expenses when they are incurred rather than focusing on revenue establishment.