Lapping Schemes in Accounting

All about lapping schemes in accounting

If there is an industry that will always try to be cheeky in its everyday transactions, it has to be the world of accounting. The accountants involved are always trying to come up with their own tricks and fraud
techniques that will see them walk away with some extra money here and there. Take for instance
this specific case regarding the lapping schemes in accounting that have been known to be going on
for a while now. This has been one of the most common ways that accountants use when it comes to
handling shortages that may arise in accounts receivable payments that are made by customers.

The whole idea basically involves covering up your tracks as you wouldn’t want to be traced and found
guilty. There are quite a number of reasons why the shortages may occurs, some of which are genuine
while others are as a result of theft or even the mismanagement of cash receipts. In most cases, it’s
usually a result of theft hence the accountants result to a method of trickery in order to cover up their
tracks. The method has been known to work quite well for some people while others ended up being
tracked down. The truth of the matter is that this method of trickery is constantly being reinvented by
new and more skilled accountants.

How accounting lapping schemes are done

By understanding how the entire lapping process occurs, you will actually be surprised at how cheeky
accountants can be. For this specific case, the accountant will receive a payment of say $100 from
customer A towards her accounts. The accountant decides not to deposit the cash but he instead
pockets it for his own use. Another customer comes in with say $130 to deposit to his account. At this
time, the accountant will credit about $100 towards customer A whose money he pocketed and then
credit the current customer B’s account with $30.

The accountant will continue this process over and over again in a creative and well calculated manner
all the way up to the end of the financial period. At the end of the period when they’re reconciling
the monies, the accountant will report the loss on the financial statements and deduct it from the net
income. This is a very tricky way of covering up your theft and it takes a very brilliant accountant to be
able to accomplish this with success.

The consequences of lapping schemes

The accountants who have been known to accomplish lapping schemes with success are those that
implement a get in and quickly get out approach. This means that they use the scheme for a specific
period of time and quickly quit the practice before anyone notices any ongoing fishy business. Those
that have greed are the ones that tend to get caught. It should be noted that lapping schemes at
whatever level are illegal and those involved, together with the conspirators are usually charged with
harsh sentences. You will not only lose your job but there is also the possibility of being charged in a
court of law as per the charged and you could either face a huge fine, a jail sentence or even both in
some cases.

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