MB-920 Describe Dynamics 365 Finance Practice Test 6 — 15 Questions

Question 1

A retail company using Dynamics 365 Finance notices that sales tax is not being calculated correctly on invoices for cross-border transactions. The tax setup includes multiple tax codes and tax groups. What is the most likely cause?

Accepted Answer

Tax codes are not correctly assigned to the items or customers involved.. Option B is correct because incorrect assignment of tax codes to items or customers is a common cause of tax calculation errors. Option A is wrong because tax authority setup does not directly affect calculation. Option C is wrong because ledger posting groups affect posting, not calculation. Option D is wrong because withholding tax is separate.

Answer

The tax authority is not configured for cross-border transactions.

Answer

The ledger posting group for sales tax is set incorrectly.

Answer

Withholding tax is enabled for the vendor.

Question 2

A company needs to generate financial statements in Dynamics 365 Finance that comply with local regulatory requirements. Which tool should be used to design custom financial reports?

Accepted Answer

Financial reporting (Management Reporter).. Option D is correct because Management Reporter (now part of Financial reporting) is the tool for custom financial reports. Option A is wrong because Power BI is for analytics, not report design. Option B is wrong because Excel integration is for ad-hoc analysis. Option C is wrong because the General ledger inquiry shows data, not reports.

Answer

Excel integration via OData.

Answer

Power BI dashboards.

Answer

General ledger inquiry.

Question 3

A company uses Dynamics 365 Finance and wants to automate the approval of purchase requisitions based on dollar amount and department. What feature should be configured?

Accepted Answer

Workflows.. Option B is correct because workflows in Dynamics 365 Finance allow automated approval processes. Option A is wrong because budget control monitors spending, not approvals. Option C is wrong because role-based security controls access, not approval flow. Option D is wrong because procurement categories classify items, not approvals.

Answer

Procurement categories.

Answer

Role-based security.

Answer

Budget control.

Question 4

A company using Dynamics 365 Finance is experiencing performance issues when running month-end close processes. The finance team suspects that the issue is related to the number of open transactions. Which strategy should be used to improve performance?

Accepted Answer

Archive historical transactions and reduce the data volume.. Option C is correct because archiving old transactions reduces the data volume, improving performance. Option A is wrong because increasing users may worsen performance. Option B is wrong because batch processing does not reduce data volume. Option D is wrong because reporting changes do not address the root cause.

Answer

Increase the number of concurrent users during close.

Answer

Modify the financial reporting to use summary data.

Answer

Run all close processes in batch mode.

Question 5

Which TWO features in Dynamics 365 Finance help organizations comply with regulatory requirements for financial reporting? (Choose two.)

Accepted Answer

Audit trails and change logs.. Options A and C are correct. Audit trails track changes to financial data, and Financial reporting (Management Reporter) allows custom reports to meet regulatory formats. Option B is wrong because budget control is for spending, not reporting compliance. Option D is wrong because vendor invoices are operational. Option E is wrong because payment schedules are for cash flow, not reporting.

Answer

Vendor invoice automation.

Answer

Payment schedules.

Answer

Budget control.

Question 6

Which THREE components are essential for setting up intercompany accounting in Dynamics 365 Finance? (Choose three.)

Accepted Answer

Intercompany relationships.. Options A, C, and E are correct. Intercompany relationships define the legal entities involved, intercompany journals handle transactions, and intercompany settlement ensures balances are settled. Option B is wrong because budget control is optional. Option D is wrong because vendor groups are not specific to intercompany.

Answer

Budget control rules.

Answer

Vendor groups.

Question 7

Which TWO account types are commonly used in the chart of accounts in Dynamics 365 Finance? (Choose two.)

Accepted Answer

Profit and loss accounts.. Options A and C are correct. Balance sheet accounts and profit and loss accounts are the main types. Option B is wrong because budget accounts are not part of the chart of accounts. Option D is wrong because statistical accounts are for non-financial data. Option E is wrong because reporting accounts are not a standard account type.

Answer

Statistical accounts.

Answer

Budget accounts.

Answer

Reporting accounts.

Question 8

A company implements Dynamics 365 Finance and needs to configure a chart of accounts that supports multiple legal entities. What is the best practice for managing shared accounts?

Accepted Answer

Use the shared chart of accounts feature and assign it to each legal entity.. Option A is correct. In Dynamics 365 Finance, the shared chart of accounts feature allows a single chart of accounts to be used across multiple legal entities, ensuring consistency and simplifying maintenance. Option B is incorrect because separate charts per entity increase complexity. Option C is incorrect because financial dimensions are used for tracking, not for sharing accounts. Option D is incorrect because deleting accounts is not a best practice.

Answer

Delete accounts that are not used across all entities.

Answer

Use financial dimensions to differentiate accounts by legal entity.

Answer

Create a separate chart of accounts for each legal entity to ensure independence.

Question 9

A manufacturing company uses Dynamics 365 Finance and wants to automate the recognition of revenue for long-term contracts. Which module should they configure?

Accepted Answer

Revenue recognition. Option B is correct. The Revenue recognition module in Dynamics 365 Finance is specifically designed for automating revenue recognition under standards like ASC 606 and IFRS 15. Option A is incorrect because Project management and accounting handles project-based costing but not revenue recognition by default. Option C is incorrect because Accounts receivable manages invoices and payments. Option D is incorrect because General ledger is the core accounting but lacks specialized revenue recognition features.

Answer

Project management and accounting

Answer

Accounts receivable

Answer

General ledger

Question 10

A company uses Dynamics 365 Finance and needs to enforce that purchase orders over $10,000 require approval from the finance manager. What is the most efficient way to configure this?

Accepted Answer

Create a purchase order approval workflow with a condition on amount.. Option C is correct. Workflows in Dynamics 365 Finance allow you to create approval processes based on conditions like amount. Option A is wrong because budget control limits spending but doesn't enforce approval workflow. Option B is wrong because vendor invoice policies are for invoices, not purchase orders. Option D is wrong because manually notifying approvers is not efficient or automated.

Answer

Configure budget control to restrict spending.

Answer

Manually notify the finance manager for high-value POs.

Answer

Set up a vendor invoice policy.

Question 11

An organization using Dynamics 365 Finance needs to streamline vendor payments by grouping multiple invoices into a single payment. Which feature should they use?

Accepted Answer

Payment proposal. Option A is correct. Payment proposals allow users to select multiple invoices for a vendor and generate a single payment. Option B is wrong because payment schedules spread a single invoice into installments. Option C is wrong because positive pay is a fraud prevention feature. Option D is wrong because electronic payment format is for file generation, not grouping.

Answer

Electronic payment format

Answer

Payment schedule

Answer

Positive pay

Question 12

A retail company using Dynamics 365 Finance notices that inventory valuations are incorrect due to varying purchase prices. Which costing method will provide the most accurate valuation by averaging costs over a period?

Accepted Answer

Weighted average. Option A is correct. Weighted average costing calculates an average cost after each receipt, smoothing out price fluctuations. Option B is wrong because FIFO assigns the oldest cost to sales. Option C is wrong because standard costing uses predetermined costs. Option D is wrong because moving average recalculates after each transaction, not over a period.

Answer

Standard cost

Answer

FIFO

Answer

Moving average

Question 13

A multinational corporation uses Dynamics 365 Finance and needs to report in both local GAAP and IFRS. What is the recommended approach?

Accepted Answer

Use multiple ledgers with different accounting frameworks.. Option D is correct. Dynamics 365 Finance supports multiple ledgers, each representing a different accounting standard. Option A is wrong because using two instances is unnecessary and complex. Option B is wrong because consolidations are for combining entities, not dual reporting. Option C is wrong because financial dimensions cannot replace separate ledgers for different GAAPs.

Answer

Set up two separate instances of Dynamics 365 Finance.

Answer

Use the consolidation module to convert IFRS to local GAAP.

Answer

Configure financial dimensions to differentiate GAAPs.

Question 14

A company uses Dynamics 365 Finance and wants to automatically post vendor invoices from a purchase order receipt. Which process should be configured?

Accepted Answer

Accounts payable parameters with automatic posting. Option B is correct. The 'Post invoice automatically' option in the accounts payable parameters allows automatic posting of vendor invoices when goods are received. Option A is wrong because vendor invoice policies are for approval. Option C is wrong because purchase order workflows handle approvals. Option D is wrong because invoice matching ensures accuracy but doesn't automate posting.

Answer

Vendor invoice policy

Answer

Invoice matching validation

Answer

Purchase order approval workflow

Question 15

An organization using Dynamics 365 Finance implements AI-driven cash flow forecasting. What data source does the feature primarily use?

Accepted Answer

Historical transaction data. Option A is correct. The cash flow forecasting feature uses historical transaction data to predict future cash flows. Option B is wrong because it does not directly pull from external bank feeds. Option C is wrong because budget data is used for planning, not forecasting. Option D is wrong because vendor payment history is part of historical transactions.

Answer

External bank account balances

Answer

Vendor payment history

Answer

Budget and forecast data