What type of theft occurs when cash is taken before it is recorded in a company's books?

Skimming refers to the theft of cash before it is recorded in the accounting system. This type of theft typically occurs when an employee takes cash from a customer and does not record the transaction in the company's books. As a result, the cash disappears before it ever has a chance to be accounted for, making it difficult for the company to trace the theft since there is no record of the transaction occurring.

This behavior often manifests in situations like taking cash payments from customers for goods or services and not ringing them up at the cash register, thereby never reporting the income. Because the income is not recorded, the owner or management may not become aware of the theft until a more thorough audit reveals discrepancies in cash flow.

Understanding skimming is critical in forensic accounting and fraud prevention because it highlights the importance of internal controls, such as proper cash handling procedures and regular reconciliation of cash receipts, to detect potential fraudulent activities early.