Final answer:
The veterinary practice is using the accrual-based accounting method, which records income and expenses as they occur, regardless of when cash is received or paid.
Step-by-step explanation:
The veterinary practice is using the accrual-based accounting method. This method records income and expenses as they are incurred, regardless of when the cash is actually received or paid. It provides a more accurate picture of the practice's financial position and performance, as it takes into account all transactions that have occurred during a specific period.
For example, if the practice performs a surgery for a client in January but the client pays for it in February, the revenue from the surgery would still be recorded in January using the accrual-based method.
On the other hand, the cash-based accounting method records income and expenses when the cash is actually received or paid. It does not consider when the transaction occurs, but rather focuses on the cash flow. This method is simpler and easier to use, but it may not accurately reflect the practice's financial health.