Which method requires expenses to be recorded when they are incurred?

Accrual basis accounting requires expenses to be recorded when they are incurred, regardless of when cash is actually paid. This method aligns expenses with the revenues they help generate in the same accounting period, adhering to the matching principle. Recognizing expenses at the time they are incurred provides a more accurate representation of a company's financial position and performance, making it easier to assess profitability and manage resources effectively.

The other methods mentioned do not follow this principle. Cash basis accounting records expenses only when cash is paid out, which can lead to mismatched periods for revenue and expense recognition. Deferred basis accounting is not a commonly recognized method in accounting and does not align with standard accounting principles. Cash flow management pertains to managing cash flow rather than the timing of expense recognition. Thus, accrual basis accounting is the correct choice as it accurately reflects when expenses are incurred in relation to business operations.