What accounting method records income when the service occurs and expenses when they are incurred?

The accrual accounting method records income when services are performed or goods are delivered, rather than when money is actually received. This approach aligns with the principle of recognizing economic events regardless of when cash transactions occur, providing a more accurate picture of a company's financial performance during a specific period.

Expenses are recorded when they are incurred, meaning a company recognizes costs when they actually happen, regardless of when cash is paid out. This method allows businesses to match revenues with the expenses incurred to generate those revenues in the same reporting period, thus adhering to the matching principle, which is fundamental in accounting.

In contrast, the cash method recognizes revenues and expenses only when cash is received or paid, so it does not provide the same comprehensive view of a company's financial status. Modified cash methods and hybrid methods combine elements of both the cash and accrual accounting systems, but they do not fully embrace the principles of recording income and expenses at the time they occur like the accrual method does. Thus, the accrual method is the most accurate and informative of the accounting methods outlined in the question.