Q.The fraudulent practice in which cash received from one debtor is pocketed by an employee, and the resulting shortfall is later concealed by crediting a payment received from a different debtor to the first debtor's account — and so on, in a continuing chain — is known as:

This question describes the classic rolling cash-misappropriation technique of covering one debtor's shortfall using a later debtor's payment. …

Why (b) is correct: "Teeming and lading" (also called the lapping of cash) is the specific, well-recognised technique in which an employee misappropriates cash received from Debtor A, and then, when Debtor B's payment is received, credits it to Debtor A's account to hide the earlier shortfall — repeating the pattern with each subsequent debtor's payment, so that no single account ever appears wrong at any given moment, even though the fraud is continuously rolling forward.

Why the distractors are wrong:

• (a) Window dressing is a form of manipulation of accounts — falsifying the reported financial position — not a specific cash-misappropriation technique involving individual debtor accounts. …

Students sometimes confuse 'teeming and lading' with any generic cash fraud. The defining feature to remember is the ROLLING cover-up across a CHAIN of different debtors' …