Question

When an employee who is authorized to make customer entries in the accounts receivable subsidiary ledger purposefully enters cash received into the wrong customer's account that employee may be suspected of

A) kiting.
B) lapping.
C) floating.
D) shorting.

Answer 1

The employee suspected of misappropriating cash by entering payments into the wrong customer accounts is engaging in (Option b) lapping, which creates an ongoing need to manipulate accounts to hide the fraud.

Step-by-step explanation:

When an employee who is authorized to make customer entries in the accounts receivable subsidiary ledger purposefully enters cash received into the wrong customer's account, that employee may be suspected of lapping. Lapping is a type of fraud that involves delaying the recording of cash receipts to hide the misappropriation of funds. For example, if Employee A receives a cash payment from Customer X but applies it to Customer Y's account, and later uses Customer Z's payment to cover Customer X's account, this creates a situation where there is an ongoing cover-up requiring consistent manipulation of accounts.