A Common Accounts Receivable Fraud Is Lapping

question 55

Multiple Choice

A common accounts receivable fraud is lapping.Which of the following is a more sophisticated accounts receivable fraud?

• A)Using journal entries to write off accounts against the allowance for doubtful accounts.
• B)Applying cash from one customer's receivable to that of another to cover the earlier deficit.
• C)Recording large discounts for the clients.
• D)Both A and C.

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Definitions:

Unearned Revenue

Money received by a company for goods or services yet to be provided, considered a liability until the service or product is delivered.

Liability

Financial obligations or debts that a company owes to others, reflected on the balance sheet.

Drawing Account

An account used to record withdrawals of cash or other assets by the owner for personal use, reducing owner's equity.

Expense

An expense refers to the money spent or cost incurred in an entity's efforts to generate revenue representing the cost of doing business.