Which accounting method records income at the time it is earned?

The accrual method of accounting is the correct choice as it recognizes income at the point when it is earned, regardless of when the cash is actually received. This method aligns with the Generally Accepted Accounting Principles (GAAP) and provides a more accurate picture of a company's financial performance during a specific time period. By recording income at the time it is earned, businesses can match income with the expenses incurred to generate that income, leading to a more realistic view of profitability.

In contrast, the cash method records income only when cash is received, which can create discrepancies in financial reporting, particularly for businesses that have significant credit sales. The depreciation and amortization methods, while important for allocating costs of long-term assets over time, do not pertain specifically to the timing of income recognition. Therefore, the accrual method is fundamentally important in ensuring that financial statements reflect the true financial status of an entity by capturing all earned revenues in the period they belong to, irrespective of cash movements.