Please read and give your thoughts on this.
For an individual who files a Schedule C or F with their Form 1040, it is possible to prepare a cash transaction account analysis to determine the understatement of income. A cash transaction account analysis is an analysis of all of the cash received by the individual and all of the cash spent by the individual over a period of time, which is usually done for one year at a time. Remember to include credit card and electronic payments in this analysis in addition to cash and checks. The theory of the cash transaction account analysis is that if an individual's expenditures during a given year exceed the reported income for the year, and the source of the funds for expenditures is unexplained then the excess amount represents unreported income.