Lapping Scheme

Written By
Paul Tracy
Updated November 4, 2020

What is a Lapping Scheme?

A lapping scheme is a fraudulent accounting practice that hides stolen cash by overlapping successive receivables.

How Does a Lapping Scheme Work?

A lapping scheme begins when someone -- a clerk, for example -- steals money that was generated by a transaction (for example, a sale). This individual offsets the missing money using cash from the next transaction. The receivable from this second transaction is covered by money from the third transaction, etc.

To illustrate, suppose Gene, a cashier for store ABC, processes a sale for $50. He puts the cash in his pocket. Gene's next customer purchases $100 of merchandise. Rather than use this customer's payment toward the corresponding $100 receivable, he uses $50 to satisfy the $50 open receivable from the first customer and uses the remaining $50 to partially offset the open $100 receivable from the second customer. Gene continues allocating (lapping) money from successive sales to the preceding receivables so the store's accounting records fail to illuminate the discrepancy.

Why Does a Lapping Scheme Matter?

A lapping scheme can only be temporarily successful because the discrepancy eventually migrates into later cash/accounting records and is documented as a loss.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Lapping Scheme.
Be the first to ask a question

If you have a question about Lapping Scheme, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Lapping Scheme, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Lapping Scheme

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms