Our tax returns are done on a cash basis; however, our financial statements (i.e., income statement, statement of cash flows, and balance sheet) are done on an accrual basis. Is this acceptable?

The required financial statements (e.g., income statement, balance sheet, and statement of cash flows) must be prepared on the same accounting basis: accrual, cash, or tax. However, the required financial documents can be prepared on a mix of accrual, cash, and/or tax basis (e.g., tax return extract prepared on a cash basis and the financial statements prepared on an accrual basis is acceptable).