Evidence to inspect · Before you buy
How tax returns, bank statements and the ledger should agree
Published · Reviewed by The Diligence Standard Team · Updated
Tax returns show reported tax positions, bank statements show cash movement and the general ledger records accounting classification. Strong diligence reconciles differences rather than treating one source as conclusive.
A realistic transaction story
A home-care company’s tax return matched annual revenue, but bank deposits included insurance proceeds and owner transfers. The ledger separated these items, revealing that cash deposited was not identical to operating revenue.
What the evidence changed
All three sources were useful, but the reconciliation explained what belonged in normalized earnings.
What to check
- Write down the exact claim and who supplied it.
- Ask what was independently tested, by whom and under what scope.
- Reconcile reported revenue and profit across tax returns, bank activity, financial statements and detailed ledger entries.
- Translate any unresolved gap into cash, price, terms, timing or a decision not to proceed.