MB-920 Describe Dynamics 365 Finance Practice Test 20 — 15 Questions

Question 1

Which TWO of the following are core financial modules in Dynamics 365 Finance?

Accepted Answer

Accounts payable. Accounts payable (C) is a core financial module in Dynamics 365 Finance because it manages vendor invoices, payment proposals, and outgoing cash flows within the payables subledger. General ledger (D) is the central core financial module that holds the chart of accounts, journals, and posting logic to which all other subledgers, including payables and receivables, post transactions. Sales and marketing (A) is a customer engagement function belonging to Dynamics 365 Sales, not a Finance financial module. Human resources (B) is delivered through Dynamics 365 Human Resources rather than as a core Finance module. Project management (E) is provided by Dynamics 365 Project Operations and is not one of the core financial modules of Dynamics 365 Finance.

Answer

Sales and marketing

Answer

Human resources

Answer

Project management

Question 2

Contoso Ltd. is a global manufacturing company with legal entities in the US (USD), UK (GBP), and Germany (EUR). They use Dynamics 365 Finance. The CFO wants a consolidated financial report that combines data from all entities into USD, using month-end exchange rates. The consolidation must be performed monthly, and adjustments should be automatically eliminated. The company also needs to maintain separate accounting rules for each entity (e.g., GAAP vs. IFRS). You are tasked with configuring the consolidation process. What should you do?

Accepted Answer

Set up a consolidation group, define exchange rates, configure elimination rules, and run the consolidation process online.. The consolidation module in Dynamics 365 Finance enables you to set up a consolidation group containing the relevant legal entities, define exchange rates (e.g., month-end rates), configure elimination rules to automatically remove intercompany transactions, and run the consolidation process online. This automates the monthly consolidation into USD while respecting each entity's accounting rules (GAAP/IFRS). Option A is incorrect because intercompany accounting handles transactions between entities, not the consolidated reporting of separate entities. Option B is incorrect because manually exporting/importing trial balances to Excel is error-prone and does not automate the process. Option C is incorrect because a general journal is for manual adjustments, not for running an automated consolidation that includes currency conversion and eliminations.

Answer

Configure intercompany accounting and use the intercompany reconciliation report.

Answer

Export each entity's trial balance to Excel, apply exchange rates, and import to a consolidated company.

Answer

Create a general journal to manually post consolidated entries using exchange rates.

Question 3

Northwind Traders uses Dynamics 365 Finance for financial operations. They have a high volume of vendor invoices (5000 per month). Currently, invoices are manually entered into the system. The AP team is overwhelmed and making errors. The company wants to implement automation using AI to capture invoice data from PDFs and emails, and automatically match them to purchase orders. They also want to set up approval workflows for invoices that do not match. You are the Dynamics 365 consultant. What should you recommend?

Accepted Answer

Implement Microsoft Dynamics 365 Invoice capture to automatically extract invoice data and use PO matching with approval workflows.. Dynamics 365 Finance includes the Invoice capture feature, which uses AI Builder/OCR to extract header and line data from PDF and email invoices, then feeds them into the vendor invoice workflow where PO matching and approval routing occur. This directly addresses the AP team's volume, accuracy, and approval requirements without custom code. It is the native, supported automation path for high-volume AP processing.

Answer

Hire temporary staff to enter invoices and use a batch posting job.

Answer

Enable vendor collaboration so vendors can enter invoices directly.

Answer

Use Microsoft Power Automate to process invoices and send them to the AP team for manual entry.

Question 4

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?

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 5

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 in Dynamics 365 Finance is the feature that uses historical transaction data and configured parameters to predict future cash inflows and outflows. It generates projected cash positions by analyzing customer payment patterns, vendor payment schedules, and other financial data, allowing the CFO to anticipate liquidity needs. This is the correct tool for forecasting future cash positions based on historical data.

Answer

Payment proposal

Answer

Bank reconciliation

Answer

Budgeting

Question 6

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 in Dynamics 365 Finance is the specific feature that enforces a three-way match between the purchase order, product receipt, and vendor invoice before an invoice can be posted or paid. Enabling this validation ensures that invoice quantities and prices are compared against the original PO and receipt quantities, and any discrepancies beyond the configured tolerances block the invoice from proceeding. This directly satisfies the requirement to automatically match invoices to PO and receipt quantities before payment.

Answer

Create a vendor payment journal

Answer

Configure a purchase agreement

Answer

Set up a payment schedule

Question 7

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. Electronic payment formats (A) are correct because they let Dynamics 365 Finance generate payment files in the bank-specific layouts required for electronic funds transfer, eliminating the manual creation of payment files and enabling automated transmission to the bank. Payment proposals (D) are correct because they let you generate suggested vendor payments based on criteria such as due date, cash discount, and vendor group, which automates the selection of invoices to pay and reduces manual effort in deciding what to pay. Vendor invoice pool (B) is a holding area for pending vendor invoices awaiting approval or matching, not a payment automation feature. Vendor hold (C) is used to block a vendor from being included in transactions or payments, which restricts rather than automates processing. Payment calendar (E) defines valid payment dates and due date calculations, but it does not itself automate payment generation or file creation.

Answer

Vendor invoice pool

Answer

Vendor hold

Answer

Payment calendar

Question 8

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. Options A, C, and D are correct because month-end foreign currency revaluation in Dynamics 365 Finance is performed separately for each relevant subledger and the general ledger: Accounts payable foreign currency revaluation (A) revalues open vendor transactions and unrealized gains/losses on AP balances, General ledger foreign currency revaluation (C) revalues main account balances in foreign currencies, and Accounts receivable foreign currency revaluation (D) revalues open customer transactions and AR balances. These three revaluation runs together ensure that monetary foreign currency balances across AP, AR, and GL comply with local accounting standards requiring month-end revaluation. Option B (Reporting currency translation) is not correct because translation converts functional currency balances into a reporting currency for consolidation/reporting, not for local month-end revaluation of foreign currency balances. Option E (Exchange rate adjustment) is not correct because it is not the specific month-end revaluation process; exchange rate adjustments relate to updating exchange rates or adjusting transactions, whereas the required actions are the dedicated foreign currency revaluation routines for AP, AR, and GL.

Answer

Run Reporting currency translation

Answer

Run Exchange rate adjustment

Question 9

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 10

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?

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 11

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 B is correct because the chart of accounts defines the structure of all main accounts used to record financial transactions, and it directly drives the general ledger, trial balance, financial dimensions, and all financial statements and reporting in Dynamics 365 Finance. Option E is correct because main accounts in Dynamics 365 Finance are stored in a shared chart of accounts table and can be referenced by multiple legal entities, allowing a consistent account structure across organizations while each legal entity maintains its own balances. Option A is incorrect because posting profiles are required to determine which main accounts are used for specific transaction types (such as customer, vendor, and inventory postings); without them, transactions cannot be posted correctly. Option C is incorrect because Dynamics 365 Finance does not limit a chart of accounts to 100 main accounts; the practical limit is far higher (tens of thousands of accounts). Option D is incorrect because main accounts are not created automatically when a legal entity is created; they must be created manually or imported into the chart of accounts.

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 12

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 B is correct because Dynamics 365 Finance supports intercompany elimination during consolidation through elimination rules configured on the consolidation accounts, allowing reciprocal balances and transactions between legal entities to be offset so the consolidated financial statements reflect only external activity. Option C is correct because intercompany journals (General ledger > Journal entries > Intercompany accounting) let you post a single voucher that automatically creates the corresponding due-to/due-from entries in the specified offset legal entities, effectively transferring balances between them. Option A is wrong because intercompany transactions are not limited to sales orders; they also cover purchase orders, intercompany journals, and other voucher types. Option D is wrong because intercompany accounting is designed to avoid duplicate manual entry — one entry generates the reciprocal entries in the counterpart legal entity. Option E is wrong because it directly contradicts option B: elimination rules do exist and are used precisely to eliminate intercompany balances 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 13

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 14

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.. To adjust standard costs effective from the start of the next fiscal year and revalue on-hand inventory, you must create a new costing version with the new standard costs and set the effective date to the next fiscal year. Then, run a cost revaluation journal to revalue inventory at the new cost. This ensures the new standard costs are used from the specified date and inventory is properly revalued.

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 15

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 the customer payment journal automate the application of customer payments to open invoices by generating payment lines based on criteria such as due date, discount date, or invoice number. This directly reduces manual effort for the accounts receivable team. Configuring payment proposals is the correct approach to automate payment application.

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.