Question

Explain lapping.

Answer 1

Lapping is a fraudulent practice which involves stealing money and covering it up by altering cash receipts from accounts receivables.

The method involves stealing money at first and then replacing it from money adjusted from the next cash receipt, which is recorded with the adjusted amount. The next receivable after the first one which is ainitially djusted, is then applied to the previous unpaid receivable. This goes on and on, till it is discovered and additional amounts may also be stolen.

Such a practice is also termed as 'teeming and lading'. It occurs in small firms where, there is no proper internal check;.