MB-920 Describe Dynamics 365 Finance Practice Test 21 — 15 Questions

Question 1

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?

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

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.

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

Question 2

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 in Dynamics 365 Finance is enabled in Accounts payable parameters, and matching policies are configured to validate invoice prices and quantities against the purchase order and product receipt. This ensures that invoices are only posted when they match the PO and receipt within defined tolerances, reducing errors and fraud.

Answer

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

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Configure vendor invoice policies to require receipt confirmation before posting.

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

Question 3

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.. Consolidating multiple legal entities with different charts of accounts and accounting standards requires a consolidation company, elimination rules for intercompany transactions, currency translation to the parent's reporting currency, and additional reporting currencies to handle GAAP vs IFRS adjustments. Option B covers all these requirements in a Dynamics 365 Finance consolidation design.

Answer

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

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

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

Question 4

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.

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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 5

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.. Under IAS 21 and ASC 830, income statement accounts are translated at the average exchange rate for the reporting period, while assets and liabilities use the closing rate and equity uses historical rates. Dynamics 365 Finance exposes this through the currency translation setup, where each main account or account category can be assigned a translation method. Selecting 'Average' for income statement accounts produces the rate that best reflects period-wide operating results and avoids distortion from end-of-period volatility.

Answer

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

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

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

Question 6

A company uses Dynamics 365 Finance. The controller wants to ensure that all journal entries are reviewed and approved by a second person before they are posted. The approval must be based on the total debit amount of the journal, and approvers must be able to reject entries with comments. What should you configure?

Accepted Answer

Set up a journal workflow for the general journal name, with an approval step and a rejection step.. The controller needs a formal approval process for journals before posting. In Dynamics 365 Finance, this is achieved by configuring a journal workflow on the journal name. The workflow can include approval and rejection steps, and conditions can be based on the total debit amount. Other options either block posting entirely, restrict who can post, or only notify after the fact, none of which provide the required review and approval.

Answer

Enable budget control on the general ledger and set the budget threshold to zero.

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Configure a posting restriction on the journal name to limit which users can post.

Answer

Create an alert on the general journal table that sends an email when a journal is posted.

Question 7

A company uses Dynamics 365 Finance to manage its financial operations. The controller wants to ensure that when a purchase order is created for a specific department, the system automatically checks whether sufficient budget is available before the order can be confirmed. Which feature should the controller configure to enforce this control?

Accepted Answer

Budget control. Budget control is the correct feature because it actively checks budget availability when documents like purchase orders are entered. It compares the requested amount against the remaining budget for the specified dimensions and takes action based on the configured threshold. This ensures the department cannot commit funds beyond its allocated budget without proper approval.

Answer

Ledger accruals

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Commitment accounting

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Budget planning

Question 8

A company is implementing Dynamics 365 Finance. The controller needs a centralized structure that defines all financial accounts used across the organization and supports reporting and posting. Which configuration component should the controller set up first?

Accepted Answer

Chart of accounts. The chart of accounts is the core structure that lists all main accounts used by a legal entity to record financial transactions. It underpins the general ledger, journals, budgets, and reporting. Financial dimensions and fiscal calendars support the chart of accounts but do not define the accounts themselves. Therefore, the controller must configure the chart of accounts first.

Answer

Fiscal calendar

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Financial dimensions

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Accounting source explorer

Question 9

A company is implementing Dynamics 365 Finance. The controller wants to ensure that when users enter a vendor invoice, the system automatically checks whether the invoice amount exceeds the remaining budget for the expense account and, if so, prevents posting until the budget is increased. Which feature should the consultant configure to meet this requirement?

Accepted Answer

Budget control. Budget control is the feature that enforces budget availability on source documents, including vendor invoices. When configured with the appropriate budget control rules and dimensions, it prevents posting if the invoice would exceed the remaining budget. Budget planning and budget register entries are related but do not provide this real-time check on invoice posting.

Answer

Budget register entries

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Encumbrance accounting

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Budget planning

Question 10

A financial controller at a retail company is reviewing how Dynamics 365 Finance handles the sequence of accounting entries that occur when a customer invoice is posted. They want to confirm which framework governs the automatic creation of ledger entries from subledger transactions. Which framework should they identify?

Accepted Answer

The accounting framework. The accounting framework is the core mechanism that maps subledger transactions, such as customer invoices, to general ledger entries using posting types and main accounts. It ensures every subledger document produces balanced double-entry postings. Posting profiles, financial dimensions, and ledger calendars are supporting configurations, but they do not define the fundamental debit and credit generation rules that the controller needs to confirm.

Answer

The financial dimensions framework

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The posting profile framework

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The ledger calendar framework

Question 11

A Dynamics 365 Finance user is attempting to post a vendor invoice that includes a line for office supplies. The invoice date is in a closed fiscal period. The user receives an error that posting is not allowed. Which configuration should the administrator review to allow posting in this period?

Accepted Answer

Ledger calendar period status. The ledger calendar period status is the correct area to review because it explicitly controls whether transactions can be posted to a given fiscal period. If the period is closed or on hold, posting is prevented. The administrator must open the period or adjust the status to allow the vendor invoice to post. Other settings like AP parameters or posting profiles do not affect period status.

Answer

Journal names setup

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Accounts payable parameters

Answer

Vendor posting profile

Question 12

A company uses Dynamics 365 Finance. They want to automate the creation of purchase orders from sales orders to streamline their order-to-cash process. What feature should they use?

Accepted Answer

Intercompany trade. Intercompany trade is designed to automate transactions between legal entities. When a sales order is created in one legal entity, the system can automatically create a corresponding purchase order in another legal entity. This reduces manual effort and errors. The other options relate to approvals, inventory reservation, or planning, but none directly create purchase orders from sales orders.

Answer

Procurement and sourcing workflows

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Master planning

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Sales order reservation

Question 13

A new accounting clerk in a company using Dynamics 365 Finance needs to record a vendor invoice that has already been approved and is ready for payment. The clerk asks which module in Dynamics 365 Finance is used to manage vendor invoices and payments. What should you tell the clerk?

Accepted Answer

Accounts payable. Accounts payable is the module in Dynamics 365 Finance dedicated to managing vendor invoices and payments. It allows users to record invoices, match them to purchase orders, and process payments. The other modules serve different purposes: accounts receivable handles customer billing, general ledger handles posting and reporting, and procurement and sourcing handles purchasing activities.

Answer

Accounts receivable

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Procurement and sourcing

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General ledger

Question 14

A company using Dynamics 365 Finance wants to ensure that all purchase orders over $10,000 are automatically routed to the department manager for approval before they can be confirmed. Which feature should the company configure to meet this requirement?

Accepted Answer

Workflow. Workflow is the correct feature because it enables the automation of business processes, including purchase order approvals. By configuring a purchase order workflow with a condition based on the total amount, the system can automatically route purchase orders over $10,000 to the department manager. This ensures compliance with the company's approval policy.

Answer

Vendor collaboration

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Purchase order confirmation

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Budget control

Question 15

A company uses Dynamics 365 Finance and needs to record a non-recurring transaction that debits the 'Legal Expense' account and credits the 'Cash' account without using a subledger. Which journal type should the accounting team use?

Accepted Answer

Daily journal. A daily journal allows direct posting to general ledger accounts without a subledger, which matches the need to debit Legal Expense and credit Cash for a non-recurring transaction. Vendor invoice, customer payment, and fixed asset journals all require specific subledger accounts and would introduce unnecessary subledger activity, so they are not suitable for this simple general ledger entry.

Answer

Customer payment journal

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Fixed asset journal

Answer

Vendor invoice journal