MB-920 Describe Dynamics 365 Finance Practice Test 19 — 15 Questions

Question 1

You are a Dynamics 365 Finance functional consultant for a company that operates in a country where tax regulations require the use of tax codes with different rates for various goods and services. The company needs to ensure that sales invoices automatically calculate tax based on the item's tax group and the customer's tax exemption status. They also need to generate tax reports for authorities. Requirements: 1) Configure tax codes and groups for automated tax calculation. 2) Handle tax exemptions. 3) Use standard Dynamics 365 Finance features. Which configuration should you set up?

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

Accepted Answer

Create sales tax codes, sales tax groups, and item sales tax groups. Assign tax exemption certificates to customers as needed.. Setting up sales tax codes, sales tax groups, and item sales tax groups, and assigning tax exemption certificates to customers, allows automatic tax calculation and reporting. Option A is correct.

Answer

Use the 'Tax calculation' service in Dynamics 365 Finance.

Answer

Configure the 'General ledger parameters' to apply a default tax rate to all transactions.

Answer

Set up a custom workflow for tax approval on each invoice.

Question 2

You are a finance manager at Contoso Ltd. The company is implementing Dynamics 365 Finance and needs to set up the chart of accounts. Which TWO statements about the chart of accounts are correct?

Accepted Answer

The chart of accounts is the foundation for financial reporting.. The chart of accounts provides the structure for categorizing financial transactions, which is essential for financial reporting. Option E is correct because Dynamics 365 Finance supports shared main accounts, allowing the same main account to be used across multiple legal entities within the organization. Option A is incorrect because posting profiles are mandatory for posting transactions; they define the accounting entries for source documents. Option C is incorrect because there is no fixed maximum of 100 main accounts; the system can support many more. Option D is incorrect because main accounts are not automatically created when a legal entity is created; they must be manually defined or imported as part of the chart of accounts setup.

Answer

Posting profiles are optional for posting transactions.

Answer

A chart of accounts can contain a maximum of 100 main accounts.

Answer

Main accounts are automatically created when a legal entity is created.

Question 3

Your organization is configuring Accounts payable in Dynamics 365 Finance. You need to set up vendor posting profiles. Which THREE components are part of a vendor posting profile?

Accepted Answer

Summary account. (Summary account) is correct because it represents the main vendor balance account in the vendor posting profile. Option B (Discount account) is correct because it is used to post cash discounts taken on vendor payments. Option C (Settlement account) is correct because it is used for payment settlement transactions. Option D (Inventory account) is incorrect because inventory posting is handled through inventory posting profiles, not vendor posting profiles. Option E (Accounts receivable account) is incorrect because accounts receivable accounts are used for customer balances, not vendor balances.

Answer

Inventory account

Answer

Accounts receivable account

Question 4

Your company is implementing Dynamics 365 Finance and needs to manage intercompany transactions. Which TWO statements about intercompany accounting are correct?

Accepted Answer

Intercompany transactions can be eliminated during consolidation using elimination rules.. Intercompany transactions can be eliminated during consolidation using elimination rules, which is a standard feature in Dynamics 365 Finance to remove intercompany balances from consolidated financial statements. Option C is correct because intercompany journals allow users to transfer balances directly between legal entities, supporting various intercompany transactions beyond sales orders. Option A is incorrect because intercompany transactions are not limited to sales orders; they include purchases, journals, and other document types. Option D is incorrect because intercompany transactions can be automated using intercompany setup and parameters, not requiring manual entry in each legal entity. Option E is incorrect because elimination rules are specifically designed to eliminate intercompany transactions during consolidation.

Answer

Intercompany transactions are only supported for sales orders.

Answer

Intercompany transactions must be entered manually in each legal entity.

Answer

Intercompany transactions cannot be eliminated during consolidation.

Question 5

You are the system administrator for Contoso Ltd., a multinational manufacturing company implementing Dynamics 365 Finance. The company has three legal entities: Contoso US (functional currency USD), Contoso Germany (EUR), and Contoso Japan (JPY). The CFO requires that all purchase orders for raw materials be centrally managed from Contoso US, but the goods must be received directly at each legal entity's warehouse. Additionally, the CFO wants to ensure that intercompany transactions are automatically posted and eliminated during month-end consolidation. You need to configure the system to meet these requirements. What should you do?

Accepted Answer

Configure intercompany purchase orders with direct delivery from Contoso US to the other entities, and set up intercompany elimination rules for consolidation.. Configuring intercompany purchase orders with direct delivery allows Contoso US to centrally manage purchasing while goods are received directly at each legal entity's warehouse. Setting up intercompany elimination rules ensures automatic elimination of intercompany transactions during consolidation, meeting the CFO's requirements. Option A is wrong because separate purchase orders and manual journals do not automate centralization or elimination. Option C is wrong because inventory transfers do not handle purchase order centralization. Option D is wrong because intercompany journals alone do not provide centralized purchasing or direct receipt functionality.

Answer

Create separate purchase orders in each legal entity and use manual journal entries to transfer costs to Contoso US.

Answer

Configure intercompany inventory transfers and use inventory journals to record movements between warehouses.

Answer

Set up intercompany journals to record transactions between legal entities and create elimination rules for consolidation.

Question 6

You are a financial analyst at Fabrikam Inc., a retail company using Dynamics 365 Finance. The company has a requirement to track expenses by department and project. Currently, the chart of accounts uses a single segment for main accounts. The CFO wants to add cost centers and projects as financial dimensions to provide more granular reporting. You need to configure financial dimensions without disrupting existing transactions. You also need to ensure that new dimensions are available for budgeting. What should you do?

Accepted Answer

Create new financial dimensions for cost center and project, activate them, and set up budget models to use these dimensions.. Creating and activating new financial dimensions, such as cost center and project, allows them to be used for future transactions without impacting existing data. By configuring budget models to use these dimensions, they become available for budgeting, meeting the requirement for granular reporting by department and project. Option B is incorrect because requiring dimension values on all journal entries would force entry on existing transactions, causing disruption. Option C is incorrect because posting restrictions would limit combinations to only existing ones, preventing the use of new dimension values. Option D is incorrect because setting dimensions as defaults on the main account does not make them available for budgeting; budget models must be configured separately.

Answer

Create new financial dimensions, activate them, and require dimension values on all journal entries. Then deactivate old dimension values.

Answer

Create new financial dimensions, then configure posting restrictions so that only existing dimension combinations are allowed.

Answer

Create new financial dimensions for cost center and project, then set them as default dimensions on the main account.

Question 7

You are the Dynamics 365 Finance consultant for Contoso Ltd., a manufacturing company that uses standard cost inventory valuation. The company recently implemented a new production line for a high-volume product. The production manager reports that the actual manufacturing costs significantly exceed the standard costs set for the product. You need to analyze the variance and adjust the standard costs for future periods. The company requires that any adjustment to standard costs be effective from the start of the next fiscal year, which begins in three months. Additionally, the inventory on hand must be revalued at the new standard cost. What should you do?

Accepted Answer

Create a costing version with the new standard costs and set the effective date to the start of the next fiscal year. Then run a cost revaluation journal to revalue inventory at the new cost.. Standard cost changes must be done through a costing version with a future effective date. The requirement is to have the new standard cost effective from the start of the next fiscal year, so creating a costing version with that effective date ensures the cost is updated only from that date. Additionally, running a cost revaluation journal revalues the on-hand inventory to the new standard cost, which satisfies the inventory revaluation requirement. Option A is incorrect because an inventory adjustment journal revalues inventory but does not change the standard cost in the item master for future periods; it would also apply immediately. Option B is incorrect because updating the costing version with immediate effect would make the new cost effective now, not at the start of the next fiscal year. Option C is incorrect because posting variances to an account does not change the standard cost for future periods; it only records the variance.

Answer

Use an inventory adjustment journal to revalue the on-hand inventory to the new standard cost and change the item's standard cost in the item master.

Answer

Create a standard cost revaluation journal for the current period and update the standard cost in the costing version with immediate effect.

Answer

Post the manufacturing variances to a variance account and close the variances to cost of goods sold at year-end.

Question 8

You are a business analyst at Northwind Traders, a wholesale distribution company using Dynamics 365 Finance. The company processes a high volume of customer invoices daily. The accounts receivable team is spending too much time manually applying customer payments to open invoices. The CFO wants to automate the payment application process to reduce manual effort. You are evaluating the use of payment journal templates and payment proposals. What should you configure?

Accepted Answer

Set up payment proposals in the customer payment journal to automatically apply payments to open invoices.. Payment proposals in Dynamics 365 Finance can automatically apply customer payments to open invoices based on matching criteria, such as invoice number or amount, reducing manual effort. Option A is incorrect: settlement priority only determines the order in which invoices are settled when multiple invoices are selected, but it does not automate the application process. Option B is incorrect: payment journal templates define default values for payment journals but do not automate the application of payments. Option C is incorrect: the 'Apply payments' button requires manual selection of invoices, which is not automated.

Answer

Configure settlement priority so that payments are automatically applied to the oldest invoice first.

Answer

Create payment journal templates that automatically post payments to the ledger.

Answer

Use the 'Apply payments' button on the customer payment journal to manually select invoices for each payment.

Question 9

You are implementing Dynamics 365 Finance for a multinational company that must comply with local tax regulations in multiple countries. The company plans to use electronic invoicing for all customer invoices. The finance team needs to configure tax codes, tax groups, and item tax groups to ensure correct tax calculation. Additionally, the company wants to use tax reporting codes to generate tax returns automatically. You need to design the tax setup. What should you do?

Accepted Answer

Create tax codes, tax groups, and item tax groups. Assign tax groups to customers and item tax groups to items. Configure tax reporting codes for tax authorities.. Tax codes define rates and rules, tax groups combine taxes for different jurisdictions, item tax groups define item-level tax, and tax reporting codes map to tax return boxes. Option A is wrong because it misses item tax groups. Option B is wrong because tax groups are not for item-level. Option C is wrong because tax reporting codes are needed for returns.

Answer

Create tax codes and tax groups. Assign tax groups to customers and set up item sales tax groups on items. Tax reporting codes are optional.

Answer

Create tax codes, then assign tax codes directly to customers and items. Use tax reporting codes for returns.

Answer

Create tax codes and tax groups. Assign tax groups to customers and item tax groups to items. Tax reporting codes are not required.

Question 10

You are a system administrator for a retail company using Dynamics 365 Finance. The company processes a large number of purchase orders and invoices daily. The accounts payable team wants to automate the matching of purchase order receipts with vendor invoices to reduce errors. You need to configure the system to perform three-way matching (purchase order, receipt, invoice). What should you do?

Accepted Answer

Enable three-way matching in Accounts payable parameters, and configure matching policies to validate prices and quantities.. Three-way matching is configured in Accounts payable parameters, where you can enable matching validation and set policies to match prices and quantities across the purchase order, receipt, and invoice. Option A is incorrect because two-way matching only matches the purchase order and invoice, not the receipt. Option B is incorrect because vendor invoice policies control receipt confirmation requirements but do not enable three-way matching. Option C is incorrect because purchase agreements set price tolerances, but the invoice matching validation is configured in Accounts payable parameters, not via agreements.

Answer

Enable two-way matching in Accounts payable parameters, and set up matching tolerance.

Answer

Configure vendor invoice policies to require receipt confirmation before posting.

Answer

Set up purchase agreements with price tolerance, and use invoice matching validation.

Question 11

You are the finance systems manager for a large manufacturing conglomerate using Dynamics 365 Finance. The company has multiple legal entities, each with its own chart of accounts. The CFO wants to consolidate financial results across all entities at month-end. The consolidation must eliminate intercompany transactions and adjust for differences in accounting standards (e.g., US GAAP vs IFRS). You need to design the consolidation process. What should you do?

Accepted Answer

Set up a consolidation company, configure elimination rules, and use currency translation to convert to the parent's reporting currency. Also, set up additional reporting currencies for IFRS adjustments.. It involves setting up a consolidation company, configuring elimination rules to automatically eliminate intercompany transactions, and using currency translation to convert to the parent's reporting currency. Additionally, setting up additional reporting currencies allows for adjustments between US GAAP and IFRS. Option A is wrong because simply creating a consolidation company and running consolidation does not automatically handle elimination rules or multi-GAAP adjustments. Option C is wrong because manual export/import is not automated and is error-prone. Option D is wrong because reporting currencies in each legal entity are used for single-entity reporting, not for consolidation-level multi-GAAP adjustments; Management Reporter is for reporting, not for the consolidation process itself.

Answer

Create a consolidation company and run the consolidation process, which automatically eliminates intercompany transactions.

Answer

Export each entity's trial balance to Excel, manually adjust for intercompany transactions, and import into a consolidation company.

Answer

Set up reporting currencies in each legal entity to report in both GAAP and IFRS, and use Management Reporter for consolidation.

Question 12

You are an implementation consultant for a company that uses Dynamics 365 Finance. The company wants to automate the reconciliation of bank transactions with bank statements. The finance team currently manually matches bank statement lines to bank transactions in Dynamics 365 Finance. The CFO wants to use the advanced bank reconciliation feature to automate this process. What should you configure?

Accepted Answer

Enable advanced bank reconciliation, import bank statements, and configure matching rules to automatically match bank statement lines to bank transactions.. Advanced bank reconciliation uses matching rules to automate reconciliation. Option B is wrong because bank accounts are required, but the key feature is matching rules. Option C is wrong because cash flow forecasting is separate. Option D is wrong because it describes a manual process.

Answer

Set up bank accounts and manually upload bank statements each day.

Answer

Use the cash flow forecasting feature to predict bank balances and reconcile manually.

Answer

Create bank transaction journals and use the 'Reconcile' button to match each transaction.

Question 13

You are a Dynamics 365 Finance administrator for a company that needs to manage fixed assets. The company purchases assets frequently and wants to automate the creation of fixed assets from purchase orders. When a purchase order for a fixed asset is invoiced, the system should automatically create a fixed asset record and post the acquisition cost. What should you configure?

Accepted Answer

On the purchase order line, set the 'Fixed asset acquisition' type, and enable automatic fixed asset creation in Fixed assets parameters.. Setting the 'Fixed asset acquisition' type on purchase lines and enabling automatic creation in Fixed assets parameters automates asset creation from purchase orders. Option B is wrong because the asset inventory module is for tracking, not financial acquisition. Option C is wrong because manual creation is not automated. Option D is wrong because integration with Asset Management is not for financial acquisition.

Answer

Use the asset inventory module to track assets and post acquisition costs to a general ledger account.

Answer

Create fixed assets manually from the Fixed assets module and post the acquisition using a fixed asset journal.

Answer

Set up integration between Dynamics 365 Finance and Dynamics 365 Asset Management to automatically create assets.

Question 14

You are the finance manager for a company that uses Dynamics 365 Finance. The company has a requirement to process recurring invoices for subscription services. The finance team wants to automate the generation of recurring invoices at the beginning of each month. The recurring invoices should be based on a template that includes predefined line items and amounts. You need to configure the system to automate this process. What should you do?

Accepted Answer

Create a recurring invoice template with the subscription items, and set up a recurring invoice batch job to generate invoices on the first day of each month.. Recurring invoice templates with subscription items can be used with the 'Generate recurring invoices' batch job to create invoices on a schedule. Option A is incorrect because credit note templates are for issuing credit notes, not invoices. Option B is incorrect because free text invoice templates are for one-off charges, not recurring subscriptions. Option D is incorrect because sales order templates are for physical goods, not subscription services.

Answer

Create a credit note template and use the 'Generate recurring credit notes' batch job to offset invoices.

Answer

Create free text invoice templates and use the 'Generate recurring invoices' batch job to create them on a schedule.

Answer

Create sales order templates and use the 'Create recurring orders' batch job to generate sales orders each month.

Question 15

You are a systems analyst at a multinational corporation using Dynamics 365 Finance. The company operates in multiple countries with different currencies. The CFO requires that all financial reports be presented in the parent company's reporting currency (USD). The company uses the currency translation feature in Dynamics 365 Finance. However, the finance team is unsure about the correct translation method for the income statement accounts. According to accounting standards, income statement accounts should be translated at the average exchange rate for the period. You need to configure the translation method. What should you do?

Accepted Answer

Set the translation method for income statement accounts to 'Average' in the currency translation setup.. The 'Average' translation method uses the average exchange rate for the period, which is appropriate for income statement accounts per accounting standards. Option A is wrong because 'Ending' is not a standard translation method in Dynamics 365 Finance. Option B is wrong because 'Current' (end of period rate) is typically used for balance sheet accounts, not income statement. Option D is wrong because 'Historical' (transaction date rate) is used for equity accounts.

Answer

Set the translation method for income statement accounts to 'Ending' (same as current).

Answer

Set the translation method for income statement accounts to 'Current' (end of period rate).

Answer

Set the translation method for income statement accounts to 'Historical' (transaction date rate).