Final Answer:
Lapping is a practice in which cash receipts are misapplied to hide fictitious receivables.
Step-by-step explanation:
Lapping: Lapping is a fraudulent accounting technique where a person misappropriates funds received from one customer to conceal the misappropriation of funds from another customer. In simpler terms, it involves manipulating cash receipts to hide the existence of fictitious receivables.
Practice of Misapplication: Lapping typically involves the individual responsible for handling incoming payments deliberately misapplying the funds. This misapplication is done to cover up the fact that funds from one customer are not being used as intended.
Fictitious Receivables: The term "fictitious receivables" refers to nonexistent or fraudulent accounts receivable. In the context of lapping, the misapplication of funds is aimed at disguising the fact that the receivables recorded on the books are not genuine.
Concealing Irregularities: Lapping is a deceptive practice designed to conceal irregularities in financial records. It can lead to a distorted financial picture and mislead stakeholders about the true financial health of an entity.