An accounting method that uses a combination of accounting methods for recognition and measurement of income items. Principally, the hybrid method of accounting is a blend between the cash basis and accrual basis. However, it may also involve other special methods of accounting. Blending may also imply the ability to switch from one mode to another with a reasonable degree of flexibility. For example, hybrid accounting may use accrual basis for revenue recognition (purchases and sales) and cash basis for other types and sources of income.

The hybrid method is mainly instrumental and allowable for internal accounting and tax purposes. It can only be applied if the blend of accounting methods clearly reflects the reporting entity’s income (and broadly income generation process). In other words, entities are restricted to apply hybrid accounting methods in specific cases, including where an entity uses the cash basis for reporting its income, in which situation it must also apply the cash basis for reporting its expenses (on the basis of matching principle). Likewise, if an entity uses the accrual method for reporting its expenses, it must also use the same method for determination of its income.