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Lapping Scheme

What is a 'Lapping Scheme'

A lapping scheme is an accounting method that involves altering the accounts receivable section of the balance sheet when cash that is intended for the payment of a receivable is stolen. The method involves taking the first receivable collected and using that to cover the theft, while the second receivable collected is accounted to the first, the third receivable to the second, and so on.

Explaining 'Lapping Scheme'

For example, assume that $100 that was to be used to pay for a receivable is stolen from ZXC Inc. The next receivable ($125) is paid to ZXC a few days later. In a lapping scheme, the first $100 of this second payment will be accounted to the first receivable account, while the remaining $25 will be put toward the second receivable.

A lapping scheme may initially be a convenient way for a company to account for theft, but the firm must eventually account for the theft as a loss and deduct it from net income.


Further Reading


A comparison of alternative covariance matrices for models with over-lapping observations
www.sciencedirect.com [PDF]
… with Bartlett weights) covariance matrix estimator to address the problem of over-lapping observations … Comparing the weighting schemes in the Newey-West estimation method, it appears that QS is … not surprisingly, we find that as T increases so the flat weighting scheme of HAN …

Robust Watermarking Method Based on Lapped Orthogonal Transform <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-WHCH200803028.htm' />Robust Watermarking Method Based on Lapped Orthogonal Transform [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-WHCH200803028.htm'>PDF]
… with Bartlett weights) covariance matrix estimator to address the problem of over-lapping observations … Comparing the weighting schemes in the Newey-West estimation method, it appears that QS is … not surprisingly, we find that as T increases so the flat weighting scheme of HAN …

Exploring alternative theories of economic regionalism: from trade to finance in Asian co-operation?Exploring alternative theories of economic regionalism: from trade to finance in Asian co-operation?
www.tandfonline.com [PDF]
… with Bartlett weights) covariance matrix estimator to address the problem of over-lapping observations … Comparing the weighting schemes in the Newey-West estimation method, it appears that QS is … not surprisingly, we find that as T increases so the flat weighting scheme of HAN …

Lapped transform-based image denoising with the generalised Gaussian priorLapped transform-based image denoising with the generalised Gaussian prior
www.inderscienceonline.com [PDF]
… with Bartlett weights) covariance matrix estimator to address the problem of over-lapping observations … Comparing the weighting schemes in the Newey-West estimation method, it appears that QS is … not surprisingly, we find that as T increases so the flat weighting scheme of HAN …

Social Welfare and HousingSocial Welfare and Housing
link.springer.com [PDF]
… with Bartlett weights) covariance matrix estimator to address the problem of over-lapping observations … Comparing the weighting schemes in the Newey-West estimation method, it appears that QS is … not surprisingly, we find that as T increases so the flat weighting scheme of HAN …

Farmland and agricultural policy in Sweden: an integrated approachFarmland and agricultural policy in Sweden: an integrated approach
journals.sagepub.com [PDF]
… with Bartlett weights) covariance matrix estimator to address the problem of over-lapping observations … Comparing the weighting schemes in the Newey-West estimation method, it appears that QS is … not surprisingly, we find that as T increases so the flat weighting scheme of HAN …

The evolution of rural planning in the Global NorthThe evolution of rural planning in the Global North
books.google.com [PDF]
… with Bartlett weights) covariance matrix estimator to address the problem of over-lapping observations … Comparing the weighting schemes in the Newey-West estimation method, it appears that QS is … not surprisingly, we find that as T increases so the flat weighting scheme of HAN …



Q&A About Lapping Scheme


How does a lapping scheme work?

A lapping scheme works by taking the first receivable collected and using it to cover the theft, while the second receivable collected will be accounted to the first, third to second, and so on.

What are some signs that your company may have been involved with an accounting fraud such as a laping scheme or embezzlement?

Some signs that your company may have been involved with an accounting fraud such as a lapsing scheme or embezzlement include increases in your account's aging period (the amount of time between when you receive money from customers for services rendered until you pay them), increases in your accounts payable (money owed to vendors who provide goods and services), decreases in your inventory levels (goods bought but not sold yet), changes in bank balances (increases/decreases) that do not match up with sales figures, etc..

How can companies prevent lapping schemes?

Companies are capable of preventing lapping by carrying out regular cash receipt audits, and by separating cashier, as well as, billing responsibilities. Lapping schemes can be detected by tracing ways in which cash receipts have been applied to customer accounts. A sign of lapping includes an increase in the aging of accounts receivables. This scheme is capable of hiding the theft temporarily. Eventually, the shortfall gets revealed and is recorded as a loss.

What is a lapping scheme?

A lapping scheme refers to a fraudulent practice which involves altering accounts receivables to hide a stolen receivable payment. This method comprises taking a subsequent receivable payment and utilizing it to cover the theft. The next receivable is applied to the former unpaid receivable, and so on.

If you suspect that there has been some sort of financial wrongdoing at your company what should you do first?

First thing's first...you need to get yourself informed about what

What is lapping scheme?

Lapping scheme is an accounting method that involves altering the accounts receivable section of the balance sheet when cash that is intended for the payment of a receivable is stolen.

What must eventually happen with a lapping scheme?

The firm must eventually account for theft as loss and deduct it from net income.

Why might a company use a lapping scheme initially?

A company may use a lapping scheme initially because it can be convenient for them in accounting for theft.

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