Which tax method allows businesses flexibility between cash and accrual reporting?

The Hybrid Method of Accounting is the correct answer because it allows businesses to combine elements of both cash and accrual accounting. This method provides flexibility by permitting businesses to use the cash method for certain types of income and expenses while applying the accrual method for others. This can be particularly useful for businesses that may benefit from the immediacy of cash accounting for their cash flow management, while still needing to adhere to the more accurate accrual accounting for other financial reporting aspects.

With the hybrid method, a business can recognize revenue when it's earned (accrual) for contracts or long-term services but still maintain cash basis accounting for day-to-day transactions, giving it a more tailored approach. This combination can help businesses optimize their tax situations and financial reporting by leveraging the strengths of each method according to their specific needs and circumstances.