In an Accounts Receivable system, what is a Customer Master Record?

Introduction / Context:
In modern accounting and ERP systems, master data is the backbone that supports transactional processing. For the Accounts Receivable and sales functions, the Customer Master Record is a core piece of master data. Understanding what information it contains and how it is used is essential for anyone working in finance, AR, or ERP implementation. This question focuses on the concept of the Customer Master Record in that context.

Given Data / Assumptions:

• The organisation sells goods or services to multiple customers.
• An accounting or ERP system is used to record orders, invoices, and receipts.
• Customer related details need to be stored once and reused consistently.
• The Customer Master Record should support credit control and correct taxation.

Concept / Approach:
A Customer Master Record is a central data record in the system that contains all important, relatively stable information about a customer. Typical fields include the customer's legal name, address, contact details, tax registration numbers, payment terms, credit limits, currency, and sometimes banking details. When sales orders, invoices, and receipts are created, the system pulls information from the Customer Master, ensuring consistency and reducing manual data entry. This master data also supports reporting, dunning, and credit management.

Step-by-Step Solution:
Step 1: Identify the type of information that needs to be reused for the same customer across many transactions, such as name and address. Step 2: Recognise that payment terms and credit limits should be consistent and controlled centrally rather than entered manually every time. Step 3: Understand that tax details such as GST or VAT numbers must be stored to ensure correct tax calculation on invoices. Step 4: Connect these needs to the Customer Master Record, which acts as a single source of truth for customer data. Step 5: Select the option that describes the Customer Master as a central record storing key customer information used across sales and AR processes.

Verification / Alternative check:
In systems like SAP, Oracle, or other ERPs, master data modules allow you to create customer records once and then use the same record in different modules such as Sales and Distribution, Accounts Receivable, and Credit Management. Changes to master data, for example an updated billing address or revised credit limit, automatically apply to future transactions. This confirms that the Customer Master Record is central, not a simple list of transactions or employees.

Why Other Options Are Wrong:
A fixed asset log lists physical assets such as machinery or buildings, not customers. A payroll employee list is part of the human resources and payroll system, not the AR module. A statutory register of shareholders is maintained for company law purposes and records ownership, not customer relationships.

Common Pitfalls:
Some candidates mix up master data with transactional data, thinking that every invoice line is part of the master. Others confuse customer master records with vendor or supplier master records. Remember that master data describes who the customer is and what standard terms apply, while transactional data records each specific sale or payment. Understanding this distinction is crucial for process design and system controls.

Final Answer:
A Customer Master Record is a central record that stores key information about a customer, such as name, address, tax details, payment terms, and credit limits, used across sales and receivables processes.