MB-920 Revenue recognition Practice Question
A retail company uses Dynamics 365 Finance and needs to recognize revenue when goods are shipped, not when invoiced. However, the standard process posts revenue at invoice time. What should the financial accountant configure to defer revenue recognition until shipment?
⚠ Common exam trap
A common trap is choosing prepayment invoices (Option D) because they involve timing differences, but they do not defer revenue recognition—they record a liability until the shipment is fulfilled.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Enable Revenue recognition and configure revenue schedules to defer recognition until shipment.
Dynamics 365 Finance includes a Revenue recognition feature that allows deferring revenue until the fulfillment of performance obligations, such as shipment. By enabling Revenue recognition and configuring revenue schedules, the company can recognize revenue at shipment rather than at invoice. Option A is incorrect because free text invoices do not integrate with shipment and would not defer revenue. Option B is incorrect because billing schedules are used for recurring invoices, not for deferring revenue based on shipment. Option D is incorrect because prepayment invoices are for advance payments, not for revenue recognition upon shipment.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Post revenue using free text invoices at shipment time.
Why it's wrong here
Free text invoices post revenue immediately upon invoicing and cannot defer revenue until shipment. This option is incorrect.
- ✗
Set up billing schedules that align revenue with shipping dates.
Why it's wrong here
Billing schedules are used for recurring invoices (e.g., subscriptions) and do not control the timing of revenue recognition relative to shipment. This option is incorrect.
- ✓
Enable Revenue recognition and configure revenue schedules to defer recognition until shipment.
Why this is correct
Enabling revenue recognition and configuring revenue schedules allows the company to defer revenue until the goods are shipped, aligning with the requirement. This is the correct choice.
- ✗
Use prepayment invoices to record revenue upon shipment.
Why it's wrong here
Prepayment invoices record advance payments as liabilities, not as revenue upon shipment. They are used for collecting payments before delivery, not for revenue deferral. This option is incorrect.
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