MB-920 Describe Dynamics 365 Finance Practice Test 18 — 15 Questions

Question 1

A small business uses Dynamics 365 Finance for the first time. They have one legal entity, one currency (USD), and simple financial needs. They want to record daily sales, pay vendors, reconcile bank accounts, and generate financial statements. They have no intercompany transactions or complex manufacturing. You are setting up the system. What should you do to minimize configuration overhead?

Choose an answer to begin — your selection is scored in the full session.

Accepted Answer

Use the standard default configurations and only customize essential modules.. For a small business with one legal entity, one currency, and simple financial needs, using the standard default configurations in Dynamics 365 Finance minimizes configuration overhead while still allowing recording of daily sales, vendor payments, bank reconciliations, and financial statements. Option A is wrong because creating a detailed chart of accounts with many segments adds unnecessary complexity for a simple setup. Option C is wrong because setting up multiple legal entities would increase overhead and is not needed for a single legal entity. Option D is wrong because intercompany accounting is not required and would add unnecessary configuration; it can be implemented later if expansion occurs.

Answer

Create a detailed chart of accounts with many segments for future expansion.

Answer

Set up multiple legal entities to separate financial data.

Answer

Configure intercompany accounting in case they expand later.

Question 2

A manufacturing company uses Dynamics 365 Finance. The finance team needs to automate the calculation of monthly depreciation for fixed assets that are acquired mid-month. Which depreciation method should be configured to ensure proportional depreciation is applied based on the number of days the asset was in service during the first month?

Accepted Answer

Straight line service life. Half year convention starts depreciation at the midpoint of the year, not proportional per day. Declining balance is an accelerated method but does not handle mid-month acquisition proportionally. Straight line service life with prorated first month is the correct method to calculate depreciation based on the exact days the asset was in service. Reducing balance is similar to declining balance. Option C is correct.

Answer

Reducing balance

Answer

Declining balance

Answer

Half year convention

Question 3

A multinational corporation uses Dynamics 365 Finance with multiple legal entities. The company needs to streamline the intercompany reconciliation process. They want to automatically generate balancing journal entries when transactions are posted between entities. Which configuration should be used to meet this requirement?

Accepted Answer

Configure intercompany accounting setup. To meet the requirement of automatically generating balancing journal entries when transactions are posted between entities, you need to configure intercompany accounting setup. This setup defines the rules for automatic balancing entries. Option A (Define intercompany transaction pairs) is used for matching intercompany transactions but does not automatically generate balancing entries. Option B (Use intercompany journal posting) is a manual process, not automatic. Option D (Set up consolidation groups) is for consolidating financial statements, not for automatic balancing. Therefore, Option C is correct.

Answer

Define intercompany transaction pairs

Answer

Use intercompany journal posting

Answer

Set up consolidation groups

Question 4

A retail company uses Dynamics 365 Finance to manage financial operations. The CFO wants to forecast cash flow using historical data. Which feature should be used to predict future cash positions?

Accepted Answer

Cash flow forecasting. Cash flow forecasting is the correct feature because it uses historical data to predict future cash positions. Option B, Cash flow forecasting, is designed for this purpose. Budgeting (D) is for planning, not forecasting. Bank reconciliation (C) matches transactions. Payment proposals (A) generate payments. Therefore, B is correct.

Answer

Payment proposal

Answer

Bank reconciliation

Answer

Budgeting

Question 5

A company uses Dynamics 365 Finance and needs to ensure that purchase order invoices are automatically matched to the original purchase order and receipt quantities before payment. Which configuration is required?

Accepted Answer

Enable invoice matching validation. Invoice matching validation enforces three-way matching between the purchase order, receipt, and invoice, ensuring quantities and amounts align before payment. Option A (vendor payment journal) is for recording payments, not matching. Option B (purchase agreement) is for long-term contracts and pricing. Option C (payment schedule) is for installment payment terms. Only Option D enables the necessary validation.

Answer

Create a vendor payment journal

Answer

Configure a purchase agreement

Answer

Set up a payment schedule

Question 6

A company is implementing Dynamics 365 Finance and needs to manage vendor payments efficiently. Which TWO features should be used to automate payment processing and reduce manual effort?

Accepted Answer

Electronic payment formats. Payment proposals automate the selection of invoices for payment. Electronic payment formats enable automated payment files for banks. Vendor hold prevents payment but does not automate. Payment calendar is for scheduling. Vendor invoice pool is for holding invoices, not automation. Options A and D are correct.

Answer

Vendor invoice pool

Answer

Vendor hold

Answer

Payment calendar

Question 7

A multinational organization uses Dynamics 365 Finance with multiple currencies. They need to comply with local accounting standards that require revaluation of foreign currency balances at month-end. Which THREE actions should be performed?

Accepted Answer

Run Accounts payable foreign currency revaluation. General ledger foreign currency revaluation adjusts account balances for exchange rate fluctuations. Accounts payable and accounts receivable foreign currency revaluation adjust vendor and customer balances, respectively. Reporting currency translation is used for converting financial statements to a reporting currency, not for revaluation. Therefore, the correct three actions are: Run Accounts payable foreign currency revaluation (A), Run General ledger foreign currency revaluation (C), and Run Accounts receivable foreign currency revaluation (D).

Answer

Run Reporting currency translation

Answer

Run Exchange rate adjustment

Question 8

A company uses Dynamics 365 Finance to manage asset lifecycle. They want to track maintenance costs and schedule preventive maintenance. Which TWO modules should be used?

Accepted Answer

Asset management. Asset management (C) is used to track maintenance, repairs, and schedule preventive maintenance for assets. Fixed assets (E) manages the financial tracking, depreciation, and lifecycle of assets. Budgeting (A) is for financial planning and not for maintenance tracking. Procurement and sourcing (B) handles purchasing and vendor management, not maintenance. Project management and accounting (D) is for project-based work, not asset maintenance. Therefore, the correct modules are Asset management and Fixed assets.

Answer

Budgeting

Answer

Procurement and sourcing

Answer

Project management and accounting

Question 9

A financial analyst runs the above export job but notices that the exported file contains entries from 2024 as well. What is the most likely cause?

Accepted Answer

The filter field name 'AccountingDate' does not match the source data field name. The filter uses 'AccountingDate ge 2025-01-01' which should filter from Jan 1, 2025, but the filter might not be applied correctly due to the source data format being CSV, which may cause date format interpretation issues. However, the exhibit shows the filter is set correctly. The most likely cause is that the filter is not applied because the data source format is CSV and the filter may use a different date format. But among options, the filter expression is case-sensitive and 'ge' is correct. Actually, the filter should work. The issue might be that the filter is not being applied because the job was run without filter. But the exhibit shows filter present. Option C is most plausible: the filter uses 'AccountingDate' but the field might be 'TransactionDate' in the source. Option D is also possible. However, the typical mistake is that the filter field name does not match. I'll go with C: The filter field name is incorrect.

Answer

The filter condition is case-sensitive and should be 'GE'

Answer

The export format should be XML instead of CSV

Answer

The export job needs to be run with the 'Apply filter' option enabled

Question 10

You are a Dynamics 365 Finance consultant for a medium-sized manufacturing company that recently implemented Dynamics 365 Finance. The company uses the perpetual inventory system with standard cost. They have encountered an issue where the inventory value in the general ledger does not match the inventory value in the inventory module. After investigation, you discover that some purchase order receipts were posted directly to the general ledger without updating inventory quantities. The CFO wants to ensure that inventory financial postings are always synchronized with inventory transactions. The company uses batch processing for inventory closing. They need a solution that prevents discrepancies in the future. Requirements: 1) Ensure that all inventory transactions update both inventory quantities and financial postings. 2) Minimize manual intervention. 3) Use existing Dynamics 365 Finance features. Which course of action should you recommend?

Accepted Answer

Enable the 'Post inventory to General ledger' parameter in Inventory and warehouse management parameters, and ensure that the 'Inventory closing' batch job runs regularly.. Enabling the 'Post inventory to general ledger' parameter in Inventory and warehouse management parameters ensures that all inventory transactions automatically update both inventory quantities and financial postings. Running the 'Inventory closing' batch job regularly recalculates inventory costs and corrects discrepancies, minimizing manual intervention. This uses existing Dynamics 365 Finance features and prevents future discrepancies. Option A requires manual comparison and adjusting entries, which introduces manual intervention and does not prevent discrepancies proactively. Option C changes the costing method but does not address the synchronization issue; standard cost can work with proper posting. Option D also relies on manual correction and does not prevent future discrepancies.

Answer

Create a recurring batch job that compares inventory value in the inventory module to GL and posts adjusting entries.

Answer

Set the 'Inventory model' to 'FIFO' instead of 'Standard cost'.

Answer

Use the 'Inventory recalculation' report monthly and manually correct discrepancies.

Question 11

You are a Dynamics 365 Finance functional consultant for a global retail chain that operates in multiple countries. The company uses Dynamics 365 Finance with a shared service center for accounts payable. They have a requirement to automatically route vendor invoices for approval based on the invoice amount and the vendor's credit limit. Invoices below $10,000 should be automatically approved if the vendor's credit limit is sufficient. Invoices above $10,000 must be approved by a manager. Additionally, invoices from new vendors must always be reviewed by the procurement team. The company uses the Vendor invoice automation feature. Requirements: 1) Automate invoice processing to reduce manual effort. 2) Ensure compliance with approval policies. 3) Use standard Dynamics 365 Finance configurations. Which configuration should you implement?

Accepted Answer

Create a vendor invoice workflow with conditional approvals based on amount and vendor status.. A vendor invoice workflow supports conditional approvals based on invoice amount and vendor status (e.g., credit limit, new vendor). This meets the requirement to automatically approve low amounts when credit is sufficient, route high amounts to a manager, and send new vendor invoices to procurement. Option A is incorrect because the Vendor invoice automation policy only auto-posts invoices without approval logic, which does not handle the conditional routing required. Option B is incorrect because the vendor invoice policy in Procurement and sourcing is used for defining approval thresholds but not for dynamic routing based on vendor status. Option C is incorrect because a payment hold rule only prevents payment, not invoice approval, and does not address amount-based routing. Therefore, D is the only option that fully satisfies the requirements using standard Dynamics 365 Finance configurations.

Answer

Use the Vendor invoice automation policy to automatically post invoices under $10,000 without approval.

Answer

Configure a vendor invoice policy in the Procurement and sourcing module.

Answer

Set up a payment hold rule for invoices from new vendors.

Question 12

You are a Dynamics 365 Finance administrator for a company that needs to generate financial reports in compliance with local GAAP. The company has multiple legal entities and wants to consolidate financial data into a single reporting entity. They also need to support multiple currencies and translation adjustments. The CFO wants to use a standard tool that integrates with Dynamics 365 Finance. Requirements: 1) Consolidate financial data from multiple legal entities. 2) Support currency translation. 3) Use a built-in tool. Which feature should you recommend?

Accepted Answer

Use the Consolidations module with currency translation settings.. Consolidations in Dynamics 365 Finance allow consolidation of multiple legal entities with currency translation. Financial reporting is for individual reports. Budgeting is for planning. Intercompany accounting is for transactions. Option A is correct.

Answer

Set up Budgeting with exchange rates.

Answer

Use Financial reporting with row definitions that sum across companies.

Answer

Configure Intercompany accounting to post balancing entries.

Question 13

You are a Dynamics 365 Finance consultant for a service company that uses the Project management and accounting module. They need to track project costs and revenue, and bill customers based on time and materials. The company wants to use the 'Work in process' (WIP) accounting method to recognize revenue as costs are incurred. They also need to automatically generate invoices based on project progress. Requirements: 1) Use WIP accounting for projects. 2) Automate invoice generation. 3) Use standard features. Which configuration should you set up?

Accepted Answer

Set up a project group with 'Time and material' project type, enable WIP accounting, and define billing rules.. It configures a 'Time and material' project group with WIP accounting enabled and defines billing rules. This setup automatically recognizes revenue as costs are incurred (WIP method) and allows automatic invoice generation based on progress. Option A (accruals) is for non-WIP methods and periodic tasks are not automated. Option B (Fixed-price) is incorrect because the company uses time and materials billing. Option C (manual invoices) does not automate invoice generation. D matches all requirements using standard features.

Answer

Enable 'Accruals' in project parameters and use periodic tasks to generate invoices.

Answer

Configure a project group with the 'Fixed-price' project type and use progress billing.

Answer

Use the 'Cost record' journal to post costs and manually create invoices.

Question 14

You are a Dynamics 365 Finance system administrator for a large manufacturing company. The company uses the 'Standard cost' inventory model and performs periodic inventory closing to recalculate standard costs. Recently, the finance team noticed that the inventory closing process is taking too long and sometimes fails, causing delays in month-end closing. They need to optimize the inventory closing process. The company has millions of inventory transactions per month. Requirements: 1) Reduce inventory closing processing time. 2) Ensure data integrity. 3) Use available Dynamics 365 Finance features. Which approach should you recommend?

Accepted Answer

Enable 'Use inventory close parallel processing' and schedule the closing batch job during off-peak hours.. Using the 'Inventory close' batch job with 'Recalculate' option and enabling 'Use inventory close parallel processing' can speed up the process. Option D is correct.

Answer

Switch to 'Moving average' inventory model to avoid closing.

Answer

Archive old inventory transactions to reduce data volume.

Answer

Run the 'Inventory recalculation' report instead of the closing process.

Question 15

You are a Dynamics 365 Finance consultant for a startup that needs to manage its financial operations. The company has a small accounting team and wants to automate bank reconciliation. They use multiple bank accounts and receive electronic bank statements in CSV format. Requirements: 1) Automatically import bank statements. 2) Match transactions automatically. 3) Use standard Dynamics 365 Finance features. Which configuration should you implement?

Accepted Answer

Configure a bank statement import source and define matching rules for automatic reconciliation.. Setting up bank statement import and automatic matching rules in the Cash and bank management module automates reconciliation. Option B is correct.

Answer

Create a data entity to import bank statements and use Excel to reconcile.

Answer

Use the 'Advanced bank reconciliation' feature with manual matching.

Answer

Enable the 'Bank reconciliation' workspace and manually enter statement lines.