Intercompany Accounting Setup in Dynamics 365 Finance
Your organization is implementing Dynamics 365 Finance and needs to ensure that intercompany transactions are automatically reconciled. Which setup is required?
Quick Answer
The correct answer is to set up intercompany accounting and define intercompany partners. This configuration is required because intercompany accounting in Dynamics 365 Finance establishes the rules for automatically posting and reconciling transactions between legal entities, ensuring that matching entries are created and settled without manual intervention. On the Microsoft Dynamics 365 Fundamentals ERP MB-920 exam, this question tests your understanding of core financial process automation, often appearing as a trap where candidates confuse intercompany setup with consolidation or elimination rules. A common mistake is selecting consolidation, which combines financial statements, or elimination rules, which remove intercompany balances during consolidation—neither of which handles the automatic reconciliation of live transactions. Remember the memory tip: intercompany accounting is for live transactions between partners, while consolidation is for reporting after the fact.
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
✓
Set up intercompany accounting and define intercompany partners.
Setting up intercompany accounting and defining intercompany partners is required for automatic reconciliation of intercompany transactions. Option A is incorrect because elimination rules are part of consolidation processes used to remove intercompany balances, not for automatic reconciliation. Option B is incorrect because allocation rules are used for distributing costs, not for intercompany reconciliation. Option D is incorrect because consolidation processes combine financial statements of multiple legal entities, which is distinct from intercompany transaction reconciliation.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Define elimination rules for intercompany transactions.
Why it's wrong here
Elimination rules are used during consolidation to remove intercompany balances.
- ✗
Create allocation rules for intercompany charges.
Why it's wrong here
Allocation rules distribute costs, not reconcile transactions.
- ✓
Set up intercompany accounting and define intercompany partners.
Why this is correct
This enables automatic posting and reconciliation between entities.
- ✗
Configure consolidation processes.
Why it's wrong here
Consolidation is a separate process for reporting, not for automatic intercompany reconciliation.
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Same concept, more angles
2 more ways this is tested on MB-920
These questions test the same concept from different angles. Work through them to make sure you can recognise it however the exam phrases it.
Variation 1. Your organization is implementing Dynamics 365 Finance and needs to manage intercompany transactions between two legal entities. The transactions should be automatically reconciled in the general ledger. Which configuration is required?
medium- A.Currency revaluation
- B.Organization hierarchy
- ✓ C.Intercompany accounting
- D.Consolidation
Why C: Intercompany accounting setup enables automatic generation and elimination of intercompany transactions, ensuring automatic reconciliation in the general ledger. Option A (Currency revaluation) is used to adjust foreign currency balances, not for intercompany transactions. Option B (Organization hierarchy) defines reporting structures but does not handle intercompany accounting. Option D (Consolidation) combines financial data from multiple entities into a single set of statements, but does not automatically reconcile intercompany transactions.
Variation 2. Which TWO of the following are features of Dynamics 365 Finance for managing intercompany transactions?
medium- ✓ A.Intercompany accounting
- B.Consolidation
- C.Fixed asset management
- ✓ D.Elimination rules
- E.Budget control
Why A: And Option D are correct. Intercompany accounting allows transactions between legal entities, and elimination rules remove intercompany activity for consolidation. Option B is wrong because consolidation is a separate feature for combining financials, not directly for managing intercompany transactions. Option C is wrong because fixed asset management deals with asset lifecycle, not intercompany transactions. Option E is wrong because budget control deals with budgeting, not intercompany transactions.
JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
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