Briefly explain the bank deposits method of reconstruction of income.
bank deposits method of reconstruction of income
The bank deposit method looks at the funds deposited during the
year. This method attempts to reconstruc gross taxable receipts
rather than adjusted.
The bank deposit method is appropriate when most of the income is
deposited in banks and most of the expenses
are paid by check. This technique may be used to audit income of
physicians or dentists who normally receive
payments from patients and insurance companies in the form of
checks as mentioned in the Boulet case.
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