Final answer:
Isabella can use the cash method for one of her business entities and the accrual method for the other.
Step-by-step explanation:
Isabella can use the cash method for one of her business entities and the accrual method for the other. The choice of accounting method depends on the nature and size of the business and its reporting requirements.
The cash method recognizes revenue and expenses when cash is received or paid out.
It is commonly used by small businesses because it is more straightforward and provides a clear picture of cash flow.
The accrual method, on the other hand, recognizes revenue and expenses when they are incurred, regardless of when cash is received or paid.
It provides a more accurate representation of the financial performance and position of a business and is commonly used by larger businesses.