MB-920 Describe Dynamics 365 Finance Practice Test 12 — 15 Questions

Question 1

A company uses Dynamics 365 Finance and needs to allocate overhead costs from a cost center to multiple departments based on square footage. Which costing method should be used?

Accepted Answer

Cost allocation. Cost allocation in Dynamics 365 Finance is the method used to distribute overhead costs from a cost center to multiple departments based on a driver such as square footage. Cost allocation rules define the source cost center, the target departments, and the allocation basis (e.g., square footage percentage), then post the allocated amounts to the appropriate dimensions.

Answer

Activity-based costing

Answer

Standard costing

Answer

Absorption costing

Question 2

A company wants to use AI to automatically classify vendor invoices in Dynamics 365 Finance. Which feature should be enabled?

Accepted Answer

Invoice capture. Invoice capture in Dynamics 365 Finance is the feature specifically designed to automatically classify and process vendor invoices using AI and machine learning. It ingests invoices from various sources (email, SharePoint, etc.), uses OCR to extract data, and then applies AI models to classify the invoice and route it for approval. This directly addresses the requirement to automatically classify vendor invoices.

Answer

Intelligent order management

Answer

Vendor collaboration

Answer

Optical character recognition (OCR)

Question 3

An organization needs to track the budget versus actual expenses for each department in real time. Which Dynamics 365 Finance feature should be used?

Accepted Answer

Budget control. Budget control in Dynamics 365 Finance is specifically designed to monitor budget versus actual expenses in real time. It checks whether budget funds are available before allowing a transaction to be posted, providing immediate feedback and preventing overspending.

Answer

Budget planning

Answer

General ledger

Answer

Financial reports

Question 4

A company using Dynamics 365 Finance needs to automate the calculation and posting of periodic transactions such as prepayments and accruals. Which feature should be used?

Accepted Answer

Periodic journal. The Periodic journal in Dynamics 365 Finance can be set up to automatically generate recurring journal entries for prepayments, accruals, and other periodic transactions. Option B is wrong because Financial Reporting is for reporting, not posting. Option C is wrong because Allocation journals allocate costs but do not handle prepayments/accruals automatically. Option D is wrong because the General journal is for manual entries.

Answer

Financial reporting

Answer

Allocation journal

Answer

General journal

Question 5

Which TWO of the following are benefits of using the General ledger module in Dynamics 365 Finance?

Accepted Answer

Provides a chart of accounts to categorize financial transactions. Option C is correct because the General ledger module is the core of Dynamics 365 Finance and its central function is to define and maintain the chart of accounts, which provides the account structure used to categorize and post every financial transaction. Option D is correct because General ledger delivers real-time financial insights and reporting through tools such as financial dimensions, period close, and built-in reports and inquiries that reflect posted transactions immediately. The other options belong to different modules: A (vendor payments and invoices) is handled by Accounts payable, B (customer invoicing and collections) by Accounts receivable, and E (inventory valuation) by Inventory management/costing, so they are not benefits of the General ledger module.

Answer

Manages vendor payments and invoices

Answer

Handles customer invoicing and collections

Answer

Manages inventory valuation

Question 6

Which THREE of the following are capabilities of the Budgeting module in Dynamics 365 Finance?

Accepted Answer

Budget control to monitor budget consumption. Option A is correct because the Budgeting module provides budget control, which checks and monitors budget consumption against available budget amounts when transactions such as purchase orders or expenses are posted. Option C is correct because budget register entries are the core mechanism in Dynamics 365 Finance for recording, updating, and transferring budget amounts, including original budgets, revisions, and transfers. Option E is correct because budget planning is a Budgeting module capability that lets organizations create budget proposals, use planning processes and workflows, and generate budget plan documents for approval. Option B is not correct because processing vendor invoices is part of the Accounts payable module, not the Budgeting module. Option D is not correct because generating financial statements is handled by Financial reporting, not by the Budgeting module.

Answer

Process vendor invoices

Answer

Generate financial statements

Question 7

Which TWO of the following are features of the Cash and bank management module in Dynamics 365 Finance?

Accepted Answer

Cash flow forecasting. Option B (Cash flow forecasting) is correct because the Cash and bank management module in Dynamics 365 Finance provides cash flow forecasting functionality, allowing organizations to project future cash inflows and outflows based on ledger, vendor, customer, and other transaction data. Option D (Bank reconciliation) is correct because the module includes bank reconciliation features that let users match bank statements against ledger bank transactions, manage unreconciled items, and reconcile bank accounts. Option A (Credit management) is incorrect because credit management is a separate module in Dynamics 365 Finance used for managing customer credit limits, credit holds, and collections, not a feature of Cash and bank management. Option C (Budget control) is incorrect because budget control is part of the Budgeting module and is used to check and enforce budget availability on transactions. Option E (Fixed asset depreciation) is incorrect because depreciation is handled in the Fixed assets module, not in Cash and bank management.

Answer

Credit management

Answer

Budget control

Answer

Fixed asset depreciation

Question 8

A manufacturing company uses Dynamics 365 Finance to manage its financial operations. The finance team notices that intercompany transactions are not being settled automatically as expected. What should you check first to resolve this issue?

Accepted Answer

Ensure the intercompany setup is correctly configured with appropriate settlement parameters.. Intercompany settlement requires a correct intercompany setup with appropriate parameters, such as settlement priority and rules. Option A is wrong because vendor posting profiles affect vendor transactions, not intercompany settlement. Option B is wrong because ledger allocation rules are for allocating amounts, not settling transactions. Option D is wrong because budget control is unrelated to intercompany settlement.

Answer

Review the vendor posting profiles.

Answer

Verify the ledger allocation rules.

Answer

Check the budget control configuration.

Question 9

A company is implementing Dynamics 365 Finance and needs to support multiple legal entities with different fiscal calendars. Which feature should be used to manage this requirement?

Accepted Answer

Individual fiscal calendars assigned to each legal entity.. Dynamics 365 Finance supports multiple fiscal calendars, and each legal entity can be assigned its own fiscal calendar in the Ledger setup. This allows entities with different year-end dates or period structures to operate independently within the same instance.

Answer

Fiscal year templates applied to all entities.

Answer

Shared fiscal calendars across all legal entities.

Answer

Ledger period configurations in the general ledger.

Question 10

A multinational corporation using Dynamics 365 Finance needs to revalue foreign currency bank accounts at month-end. The finance manager wants to automate this process and ensure that exchange rate differences are posted to the correct accounts. What is the best approach?

Accepted Answer

Use the Foreign currency revaluation feature in General ledger.. The Foreign currency revaluation feature in Dynamics 365 Finance is specifically designed to revalue foreign currency bank accounts and ledger accounts at period-end, automatically calculating exchange rate differences and posting them to designated gain/loss accounts. It supports automation through batch jobs and ensures compliance with accounting standards by using configured exchange rate types. This is the standard, auditable approach for month-end revaluation.

Answer

Create manual journal entries for each bank account using the month-end exchange rate.

Answer

Use the General journal to post exchange rate adjustments.

Answer

Configure exchange rate types for each currency pair.

Question 11

A company uses Dynamics 365 Finance and needs to track expenses by department and project. Which dimension type should be used to capture this information?

Accepted Answer

Financial dimensions.. Financial dimensions in Dynamics 365 Finance are the actual data elements (such as Department, CostCenter, or Project) that get attached to transactions to enable tracking and reporting by those categories. To track expenses by department and project, you create financial dimensions for Department and Project and assign them to the relevant account structures. Dimension sets and account structures are configuration mechanisms that use dimensions, not the dimensions themselves.

Answer

Account structures.

Answer

Dimension sets.

Answer

Advanced rules.

Question 12

An organization is migrating to Dynamics 365 Finance and needs to ensure that historical financial data from the legacy system is preserved for reporting. What is the recommended approach?

Accepted Answer

Use data migration tools to import historical data into Dynamics 365 Finance.. The recommended approach is to use data migration tools to import historical data into Dynamics 365 Finance. This ensures that historical financial data is available for reporting within the new system, maintaining continuity and avoiding the need to maintain legacy systems.

Answer

Re-enter all historical transactions manually.

Answer

Only migrate summary balances for prior periods.

Answer

Maintain the legacy system for historical reporting.

Question 13

A retail company using Dynamics 365 Finance notices that sales tax is not being calculated correctly on invoices for cross-border transactions. The tax setup includes multiple tax codes and tax groups. What is the most likely cause?

Accepted Answer

Tax codes are not correctly assigned to the items or customers involved.. If tax codes are not assigned to items or customers, the system cannot determine the appropriate tax rate, leading to incorrect calculations. Option B is wrong because the tax authority configuration is about reporting and remittance, not calculation. Option C is wrong because ledger posting groups only affect where tax amounts are posted, not how they are calculated. Option D is wrong because withholding tax is a separate deduction and does not impact sales tax calculation.

Answer

The tax authority is not configured for cross-border transactions.

Answer

The ledger posting group for sales tax is set incorrectly.

Answer

Withholding tax is enabled for the vendor.

Question 14

A company needs to generate financial statements in Dynamics 365 Finance that comply with local regulatory requirements. Which tool should be used to design custom financial reports?

Accepted Answer

Financial reporting (Management Reporter).. Financial reporting (Management Reporter) is the dedicated tool in Dynamics 365 Finance for designing, generating, and distributing statutory and management financial statements such as balance sheets, income statements, and cash flow statements. It supports row/column/tree definitions that map to main accounts and dimensions, enabling compliance with local regulatory formats. It also supports XBRL tagging for regulatory filings in many jurisdictions.

Answer

Excel integration via OData.

Answer

Power BI dashboards.

Answer

General ledger inquiry.

Question 15

A company uses Dynamics 365 Finance and wants to automate the approval of purchase requisitions based on dollar amount and department. What feature should be configured?

Accepted Answer

Workflows.. Workflows in Dynamics 365 Finance allow you to define automated approval processes based on criteria such as dollar amount and department. Option B is incorrect because procurement categories are used to classify items, not to automate approvals. Option C is incorrect because role-based security controls access permissions, not approval flows. Option D is incorrect because budget control monitors spending against budgets, not the approval of purchase requisitions.

Answer

Procurement categories.

Answer

Role-based security.

Answer

Budget control.