The accountant wants to see a breakdown of customers' balances by country in the financial reports. How can this be set up and which report should be used?

Question

Options

• ASet up an accounts receivable control account for each country, and use the balance sheet
• BSet up an accounts receivable control account for each country and use the profit and loss report.
• CSet up a customer group for each country, and use the balance sheet leport to display the
• DSet up a customer group for each country, and use the profit and loss report to display the

• A
  71% (10)
• B
  7% (1)
• C
  7% (1)
• D
  14% (2)

Explanation

Option A is correct because accounts receivable (AR) control accounts are the proper accounting mechanism for tracking customer balances by country - each control account aggregates the sub-ledger entries for customers in that country. The balance sheet is the right report because AR is a current asset, and asset balances appear on the balance sheet, not the profit and loss (P&L) report.

Why the others are wrong:

• B uses the right setup (AR control accounts) but the wrong report - the P&L shows revenues and expenses over a period, not customer balance positions.
• C uses customer groups, which are a CRM/segmentation tool for grouping customers in a system, but they don't create separate accounting control accounts; the balance sheet part is correct, but the mechanism isn't.
• D combines the wrong mechanism (customer groups) with the wrong report (P&L) - doubly incorrect.

Memory tip: Think "Balance = Balance Sheet." Customer balances (what they owe you, i.e., AR) live on the Balance Sheet. If you need those balances split by country, you need a separate control account per country - groups are for filtering in a system, not for creating distinct accounting ledger entries.

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