SHORT ANSWER · BANK DEPOSITS METHOD
What is the bank deposits method?
The bank deposits method rebuilds income from bank records: total every deposit to every account, remove transfers between accounts, loans, gifts and other money that isn’t income, then add income spent in cash. Tax investigators and forensic accountants use it when books are missing or unreliable. It only works if every account and every month was produced.
DEFINITION
What is a bank deposits method?
The bank deposits method is an indirect way to rebuild income from bank records, by taking out every deposit that isn’t income and adding back income spent in cash.
WORKED EXAMPLE
How does the calculation work?
Here it is on one made-up year with round numbers. Choosing a tool? See the best bank statement analysis software.
| Line | Amount |
|---|---|
| Total deposits, every account | 186,400.00 |
| Less transfers between own accounts | −24,000.00 |
| Less loan proceeds | −15,000.00 |
| Deposits from income | 147,400.00 |
| Plus income spent in cash before it was deposited | 9,600.00 |
| Income rebuilt from the bank | 157,000.00 |
| Less income reported | −118,000.00 |
| Unexplained | 39,000.00 |
The unexplained figure is a question, not a finding. Each transfer has to be matched to the other account, which is why every account in the production matters.
ZeraBooks builds the workflow around your matters and your template for free. No development charge, whether it’s a forensic department or one person.
WHAT BREAKS IT
Why does a missing statement break the method?
Because the method counts every deposit. In Matter 25-117, checking ••4417 closes March at 18,240.55 and opens May at 21,905.10; April was never produced, and its deposits are simply absent from the total. ZeraBooks flags that month before you start, and counts a statement uploaded twice only once, so deposits aren’t doubled either.
The method sits beside other fraud tests: see how do you analyze bank statements for fraud? and the digit test in how is Benford’s law used in forensic accounting?
Who uses the bank deposits method?
Tax investigators and forensic accountants, mostly when the books are missing or can’t be relied on. Family-law experts use it to test claimed income too.
What counts as a non-income deposit?
Transfers between the person’s own accounts, loan proceeds, gifts, refunds and money that was already counted. Each one needs a document behind it.
Does ZeraBooks run the bank deposits method?
No. ZeraBooks proves every statement and flags missing months, so the deposit total you start from is complete. The calculation and its conclusions are yours.
Sources and further reading
FREE CUSTOM BUILD
Count every deposit.
Prove every month first.
ZeraBooks ties each statement and flags the month nobody produced, so the method starts from the whole year.