ABC Corp. has the following Organization Structure: 1) Legal Entity: A 2) Operating Units: B and C 3) Balancing Entities: 10, 20, and 30 Identify three correct statements regarding the Balancing…

Question

Options

• AEach Balancing Entity must balance within itself.
• BThere can be multiple Balancing Entities within an Operating Unit.
• CBalancing Entity is the lowest postable unit in the Chart of Accounts.
• DBalancing Entities can be automatically secured at the Legal Entity level.
• EBalancing Entities can be secured at the Operating Unit level through Security Rules.

• A
  73% (33)
• C
  20% (9)
• D
  7% (3)

Explanation

A is correct because a Balancing Entity is defined by its self-balancing requirement - every journal entry must net to zero within that entity, with the system generating automatic balancing lines for cross-entity transactions. B is correct because the structure in the question itself demonstrates this: Operating Units B and C collectively contain three Balancing Entities (10, 20, 30), meaning at least one Operating Unit hosts more than one. E is correct because access to Balancing Entities is controlled via Segment Value Security Rules, which are assigned at the Operating Unit (responsibility) level - not automatically at any higher tier.

C is wrong because the lowest postable unit in a Chart of Accounts is the full account combination (all segments together), not the balancing segment alone; the balancing segment is just one component of that combination. D is wrong because security on Balancing Entities is not automatic at the Legal Entity level - it must be explicitly configured through Security Rules, making E the accurate statement about securing them.

Memory tip: Think of Balancing Entities as "mini-ledgers" inside an Operating Unit - each one keeps its own books balanced (A), you can have several of them in one OU (B), and a security guard (Security Rules) stands at the OU door to control who enters each one (E).

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