MB-920 Describe Dynamics 365 Finance Practice Test 7 — 15 Questions

Question 1

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

Accepted Answer

Intercompany relationships.. Options B, D, and E are correct. Intercompany relationships define the legal entities involved, intercompany journals handle transactions between those entities, and intercompany settlement ensures that balances are settled properly. Option A (budget control rules) is not essential for intercompany accounting; it is an optional feature for budget management. Option C (vendor groups) is used for vendor categorization but is not specific to intercompany setup.

Answer

Budget control rules.

Answer

Vendor groups.

Question 2

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 C and D are correct. Profit and loss accounts and balance sheet accounts are the two main account types in a standard chart of accounts for Dynamics 365 Finance. Option A is incorrect because statistical accounts are used for non-financial data, not as primary account types. Option B is incorrect because budget accounts are separate from the chart of accounts and used for budgeting purposes. Option E is incorrect because reporting accounts are not a standard account type in the chart of accounts.

Answer

Statistical accounts.

Answer

Budget accounts.

Answer

Reporting accounts.

Question 3

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.. The shared chart of accounts feature in Dynamics 365 Finance allows a single chart of accounts to be used across multiple legal entities, ensuring consistency and simplifying maintenance. Option A is incorrect because deleting unused accounts is irrelevant to sharing. Option C is incorrect because financial dimensions are used for tracking, not for sharing the chart of accounts. Option D is incorrect because separate charts per entity increase complexity and are 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 4

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. 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 5

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.. 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 manually notifying approvers is not efficient or automated. Option D is wrong because vendor invoice policies are for invoices, not purchase orders.

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 6

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. Payment proposals allow users to select multiple invoices for a vendor and generate a single payment. Option A is wrong because electronic payment format is for generating payment files, not for grouping invoices. 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.

Answer

Electronic payment format

Answer

Payment schedule

Answer

Positive pay

Question 7

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

Answer

Standard cost

Answer

FIFO

Answer

Moving average

Question 8

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.. Dynamics 365 Finance allows multiple ledgers to be attached to the same legal entity, each with a different accounting framework (e.g., local GAAP and IFRS). Option B is wrong because using two separate instances would require duplicate data entry and is not necessary. Option C is wrong because the consolidation module is used to consolidate financial results from multiple entities, not for dual reporting within one entity. Option D is wrong because financial dimensions are for segmenting financial data, not for applying different accounting standards.

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 9

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. The 'Post invoice automatically' option in the accounts payable parameters (Accounts payable > Setup > Accounts payable parameters > Invoice > Invoice validation) allows automatic posting of vendor invoices when goods are received from a purchase order. Option A is wrong because vendor invoice policies are used for invoice approval, not automatic posting. Option B is wrong because invoice matching validation ensures accuracy between the invoice, receipt, and purchase order but doesn't automate posting. Option D is wrong because purchase order approval workflows handle the approval process, not automatic invoice posting.

Answer

Vendor invoice policy

Answer

Invoice matching validation

Answer

Purchase order approval workflow

Question 10

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. The AI-driven cash flow forecasting feature in Dynamics 365 Finance primarily uses historical transaction data to predict future cash flows. Option B is incorrect because external bank account balances are not directly used; the feature relies on internal transaction history. Option C is incorrect because while vendor payment history is a component of historical transactions, the system primarily uses the broader set of historical transaction data, not just vendor payment history. Option D is incorrect because budget and forecast data are used for planning and analysis, not as the primary input for the AI-driven cash flow forecasting.

Answer

External bank account balances

Answer

Vendor payment history

Answer

Budget and forecast data

Question 11

A company uses Dynamics 365 Finance and needs to ensure that intercompany transactions are eliminated during consolidation. What must be set up?

Accepted Answer

Intercompany elimination rules. Intercompany elimination rules in Dynamics 365 Finance are specifically designed to automatically eliminate intercompany transactions during consolidation. Option A is incorrect because financial dimensions are used for reporting and analysis, not for eliminating transactions. Option B is incorrect because consolidation groups are used to group legal entities for consolidation, not to eliminate intercompany transactions. Option D is incorrect because intercompany accounting processes intercompany transactions but does not automatically eliminate them during consolidation.

Answer

Financial dimensions for intercompany

Answer

Consolidation groups

Answer

Intercompany accounting

Question 12

Which TWO features in Dynamics 365 Finance help ensure compliance with regulatory reporting requirements?

Accepted Answer

Electronic reporting (ER) tool. Options B and D are correct. Electronic reporting (ER) is a tool that enables configuring formats for regulatory and tax documents, ensuring compliance with reporting requirements. Tax reporting features in Dynamics 365 Finance handle specific tax compliance calculations and submissions. Option A is incorrect because budget control is about managing spending limits, not regulatory reporting. Option C is incorrect because fixed asset management tracks asset lifecycle but does not generate regulatory reports. Option E is incorrect because vendor collaboration is for communication with vendors, not regulatory compliance.

Answer

Budget control

Answer

Fixed asset management

Answer

Vendor collaboration

Question 13

Which THREE modules are part of Dynamics 365 Finance?

Accepted Answer

Budgeting. Options B, C, and D are correct. Budgeting, General ledger, and Accounts payable are core modules in Dynamics 365 Finance. Option A is incorrect because Human resources is a separate Dynamics 365 app, not part of Finance. Option E is incorrect because Project management and accounting is part of Dynamics 365 Project Operations, not Finance.

Answer

Human resources

Answer

Project management and accounting

Question 14

Which TWO configurations are required to enable intercompany accounting in Dynamics 365 Finance?

Accepted Answer

Intercompany accounting sequences. Options A and B are correct. Intercompany accounting sequences must be set up to define the document numbering for intercompany transactions, and intercompany partners must be defined to establish the legal entities involved. Option C is incorrect because a shared chart of accounts is beneficial but not required. Option D is incorrect because currency revaluation is a separate process not mandatory for intercompany accounting. Option E is incorrect because budget control configuration is unrelated to intercompany accounting.

Answer

Shared chart of accounts across legal entities

Answer

Currency revaluation rules

Answer

Budget control configuration

Question 15

Refer to the exhibit. A Dynamics 365 Finance administrator is configuring a financial dimension set. What is the primary purpose of this configuration?

Accepted Answer

To enable reporting and analysis by the selected dimensions. Financial dimension sets allow users to group and analyze financial data by selected dimensions for reporting and analysis purposes. Option A is incorrect because the main account and dimension structure is defined by account structures, not dimension sets. Option B is incorrect because validation of dimension combinations is done by advanced rule structures, not dimension sets. Option C is incorrect because dimension sets do not control access; security roles and policies handle data access.

Answer

To define the main account and dimension structure

Answer

To validate financial dimension combinations

Answer

To restrict user access to specific financial data