Written by:
Image
Paul Tracy

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 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

View all posts
Updated August 5, 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.

Ask an Expert about Lapping Scheme
At InvestingAnswers, 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

Read this next

Don't Know a Financial Term?
Search our library of 4,000+ terms
 - profile
Ask an Expert about Lapping Scheme

By submitting this form you agree with our Privacy Policy

Share
close