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

Question 1

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.. Option A is correct because the chart of accounts defines the financial structure used for reporting. Option D is correct because main accounts can be shared across legal entities using shared main accounts. Option B is wrong because main accounts are not created automatically; they must be defined. Option C is wrong because the chart of accounts is not limited to 100 accounts; it can have many. Option E is wrong because posting profiles are required for transaction posting.

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 2

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. Option A is correct because the summary account is used for vendor balances. Option C is correct because the settlement account is used for payment settlements. Option E is correct because the discount account is used for cash discounts. Option B is wrong because inventory accounts are in inventory posting profiles. Option D is wrong because the AR account is for customer balances.

Answer

Inventory account

Answer

Accounts receivable account

Question 3

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.. Option A is correct because intercompany transactions require elimination rules for consolidation. Option C is correct because intercompany journals can be used to record transactions between legal entities. Option B is wrong because intercompany transactions can be automated. Option D is wrong because intercompany transactions are not limited to sales orders; they include purchases and other transactions. Option E is wrong because intercompany transactions can be eliminated 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 4

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.. Option C is correct because using intercompany journals and setting up intercompany purchase orders with direct delivery and intercompany elimination rules meets the requirements: centralized purchasing, direct receipt, and automatic elimination. Option A is wrong because it relies on manual journals and does not automate elimination. Option B is wrong because inventory transfers do not handle purchase order centralization. Option D is wrong because creating separate purchase orders in each entity defeats the centralization requirement.

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 5

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.. Option C is correct because activating dimensions and integrating them with budgets allows tracking and budgeting by department and project. Option A is wrong because using default dimensions does not enforce entry. Option B is wrong because deactivating dimension values would prevent tracking. Option D is wrong because restricting posting to existing dimensions would block new combinations, but the requirement is to add new dimensions.

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 6

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.. Option B is correct because using a cost revaluation journal revalues inventory and changing standard costs through the costing version allows the new costs to be effective from a future date. Option A is wrong because adjusting in the current period would not wait for the next fiscal year. Option C is wrong because posting variances to a variance account does not change the standard cost. Option D is wrong because inventory adjustment journals do not change standard costs.

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 7

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.. Option A is correct because payment proposals can automatically apply payments to open invoices based on matching criteria. Option B is wrong because payment journal templates only set default values, not automation. Option C is wrong because settlement priority is a manual setting. Option D is wrong because it describes a manual process.

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 8

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.. Option D is correct because 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 9

You are the finance controller at Contoso Ltd., a service company that uses Dynamics 365 Finance for project accounting. The company has multiple ongoing projects, each with a budget. The project managers need to track actual costs against budget in real time. They also need to be able to forecast future costs and revenue for each project. The CFO wants to use the Project budget feature to control costs. You need to configure the system to meet these requirements. What should you do?

Accepted Answer

Set up project budgets with budget control, and use project forecasts to predict future costs and revenue.. Option C is correct because project budgets allow tracking actual vs budget, and budget control ensures costs do not exceed budget. Forecasting can be done using project forecasts. Option A is wrong because fixed-price projects do not allow flexible forecasting. Option B is wrong because expense journals are not for budget tracking. Option D is wrong because work breakdown structures are for task management, not budget control.

Answer

Create project budgets using the project budget control feature, and use expense journals to post costs.

Answer

Set up each project as a fixed-price project and use the project budget control feature to track costs.

Answer

Create a work breakdown structure for each project and use the project budget control feature to monitor costs.

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.. Option B is correct because three-way matching is enabled in Accounts payable parameters and requires prices and quantities to match. Option A is wrong because two-way matching only matches PO and invoice. Option C is wrong because purchase agreements are for pricing, not matching. Option D is wrong because invoicing policies are not for matching.

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.. Option D is correct because using consolidation companies with elimination rules and currency translation addresses multi-GAAP consolidation. Option A is wrong because exporting to Excel is not automated. Option B is wrong because reporting currencies are for single entity, not consolidation. Option C is wrong because it does not handle elimination or different accounting standards.

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.. Option A is correct because 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.. Option B is correct because setting the 'Fixed asset acquisition' type on purchase lines and enabling automatic creation in Fixed assets parameters automates asset creation from purchase orders. Option A is wrong because integration with asset management is not for financial acquisition. Option C is wrong because manual creation is not automated. Option D is wrong because the asset inventory module is for tracking, not 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.. Option C is correct because recurring invoices are created from a template with a recurrence pattern. Option A is wrong because free text invoices are for occasional use. Option B is wrong because sales orders are for goods, not subscriptions. Option D is wrong because credit notes are for corrections.

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.. Option A is correct because the 'Average' translation method uses the average exchange rate for the period, which is appropriate for income statement accounts. Option B is wrong because 'Current' is for balance sheet. Option C is wrong because 'Historical' is for equity. Option D is wrong because 'Ending' is not a standard method.

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).