MB-920 Describe Dynamics 365 Finance Practice Question
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?
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 the translation method for income statement accounts to 'Average' in the currency translation setup.
The 'Average' translation method uses the average exchange rate for the period, which is appropriate for income statement accounts per accounting standards. Option A is wrong because 'Ending' is not a standard translation method in Dynamics 365 Finance. Option B is wrong because 'Current' (end of period rate) is typically used for balance sheet accounts, not income statement. Option D is wrong because 'Historical' (transaction date rate) is used for equity accounts.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Set the translation method for income statement accounts to 'Ending' (same as current).
Why it's wrong here
Incorrect. 'Ending' is not a valid translation method for income statement accounts in Dynamics 365 Finance. The correct method is 'Average'.
- ✗
Set the translation method for income statement accounts to 'Current' (end of period rate).
Why it's wrong here
Incorrect. 'Current' (end of period rate) is used for balance sheet accounts, not income statement accounts which should use 'Average'.
- ✓
Set the translation method for income statement accounts to 'Average' in the currency translation setup.
Why this is correct
Correct. 'Average' uses the average exchange rate for the period, as required by accounting standards for income statement accounts.
- ✗
Set the translation method for income statement accounts to 'Historical' (transaction date rate).
Why it's wrong here
Incorrect. 'Historical' (transaction date rate) is used for equity accounts, not income statement accounts.
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