Dictionary / Embezzlement
What does Embezzlement mean in accounting?
Quick definition
GeneralTo appropriate fraudulently to one's own use, as money or property entrusted to one's possession. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
A Saturday till that never matched the tape
You run a neighborhood cafe. On June 7 the closer bags the drawer: the register tape shows $980 cash sales, but the bank deposit slip she left is $640. She had custody of that cash, so the $340 gap is embezzlement, not a missed sale; do not lower June 7 sales to $640. In QuickBooks Online or Xero, reduce undeposited funds or cash $340 and post $340 to Due from employee. She reimburses you on June 14; clear that receivable into checking so the bank deposit and the employee receivable both go to zero.
Paid invoices whose checks never hit the bank
Your HVAC shop's office manager records customer payments. In March you notice three invoices to a condo-association client ($2,100, $1,850, and $960) show paid, but those checks never hit checking; she had the envelopes and deposited them elsewhere. That is embezzlement of cash entrusted to her, not a bank-feed matching error. In QuickBooks Online or Xero, reopen those invoices or move $4,910 from cash to Due from employee so accounts receivable and cash are honest. File the crime-coverage claim; when the insurer pays $4,200 on April 22, apply it to that receivable and write off the leftover $710.
Why it matters
Embezzlement is when someone you trusted with cash or property takes it for their own use. You will not post this most months; it shows up only after you find missing deposits, an unauthorized transfer, or stock that was in an employee's care. Leave the gap buried as miscellaneous expense and the balance sheet still shows cash or inventory the business no longer has, while you lose the trail for a receivable, a recovery, or an insurance claim. Do not mix it up with distort, which is a false impression on a report; distortion misstates numbers, while embezzlement is theft of assets already in that person's possession.
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What is Embezzlement in bookkeeping?
To appropriate fraudulently to one's own use, as money or property entrusted to one's possession.
When should I use Embezzlement?
Use Embezzlement when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Embezzlement?
Embezzlement is used for embezzlement entries, while Earned Income covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.