Microsoft Dynamics 365 F&O Finance Functional Interview questions
Hello Friends,
I am Vikas Vaish the Microsoft dynamics D365 F&O Techno-Functional consultant. Below are the few questions that I have faced while interviewing for Microsoft Dynamics 365 F&O Finance Functional consultant. I have tried to give answers based on my experience which mostly worked for me 😉. Feel free to share your thoughts through the comment section. Even I am learning and let do it together.
1) What is COA?
The chart of accounts is a structured list of a legal entity's general ledger accounts. The list is used to prepare financial reports for authorities and owners. The accounts are first grouped into types of accounts and then further aggregated into larger categories. At the most general level, the accounts are grouped as revenues and costs (operating accounts), and assets and liabilities (balance accounts).COA can be shared and used by any legal entity in an organization. COA that is used by a legal entity is defined on the Ledger page.
2) What is the Main account
The main account is an individual account in the general ledger. It is used to record financial transactions, balances, or totals that pertain to assets, liabilities, revenues, expenses, and owner equity.
3) What are the Main account categories
It is used for the classification and grouping of your Main account. The main account category is used for reporting and in cubes for business intelligence. Standard Main account category cannot be deleted.
Below are a few examples
- Cash and bank
- Account Receivable
- Inventories
- Long term Loans Receivables
- Short term loans
4) What are the things to be considered while creating COA
The answer is referred from
- What degree of specification is needed?
- How should the chart of accounts be structured?
- Have external accountants offered any suggestions about the structure of the chart of accounts? And does the customer want to follow them?
- What accounts do they need in the system?
- What information do they need to track financially?
- What accounts and dimensions need to be tracked together?
- Do they need to track the cost center?
- Do they want Finance to create account numbers automatically or do they want to create them manually?
- Make sure that there is enough space between the account numbers so that in the future, additional main accounts can be created between the existing main accounts.
- Decide whether operating accounts should come before balance accounts or the other way around.
- The reporting requirements of the country or region where your organization is based.
- The reporting requirements of your legal entity.
- The degree of specification that is required, for both external organizations and for your organization.
5) What are Account Structures
Account structures use the main account and financial dimensions to create a set of rules that determine the order and values used when entering the account number.
- Account Structure consists of different Segments which are our Main account and Financial dimension combination.
- Multiple Account Structures can be created.
- The Main account and dimension values between two account structures or the same account structure cannot be overlapped.
- We need to activate the account structure after creating it.
6) Advanced rules
Additional validation on top of Account Structure but do not override the validation in Account Structure. It does not override any rules defined in account structure but helps to add additional validation which might not be possible using Account structure. Below is one of the examples however its implication in real-time is quite vast.
For Example:
Suppose we have an Account structure defined for the main account ranging from 1000 to 5000 and we have defined a rule which states that for ac 1000 to 5000 user needs to specify the 3 financial dimensions for example “Cost Centre”, “Branch”, “Project” however if a client demands that we need to track additional dimension for AC 2000 to 3000 i.e. “Department”, So in this case, we can create new Advance rules with the segment “Department” and assign the same to Account structure. While assigning it to the Account structure, Select the Main account from 2000 to 3000 on the Account Structure --> Advance rules form.
7) How many Posting layers are available in Dynamics?
There is a total of 10 posting layers available in Dynamics i.e., Tax, Current, Operation, and Custom layer 1 to Customer layer 7. This is basically used for parallel accounting. In real-time, it is mostly used for FA transactions where the depreciation of one asset needs to be calculated differently based on your country Tax rule and Organization rule.
8) Derived Dimensions
Namely, it is used to derive the dimension value based on previously selected dimensions while filling the Dimensions on Transaction/Document. This helps users select the correct dimension and save their time to enter all the details. Users can any time change the value defaulted from deriving dimension as per their requirement.
While adding a new segment in Derive dimension form, the user can also mark it fixed so that the end-user while filling the dimension cannot change derive dimension value.
Example: Consider a scenario where we have 3 dimensions: Business Unit, Cost center, and Department. Here when the user selects a Business Unit value, Value in the Cost center and department need to have defaulted. To accomplish this scenario, we can use Derived Dimensions.
9) Inter-Company Accounting
You can use intercompany accounting when accounting processes are centralized for subsidiaries or branch offices. With intercompany accounting, you can create a single entry that posts to multiple companies.
Setup
a) Intercompany Ledger accounts with type as a Balance sheet.
b) Intercompany Journal with Unique Voucher series to Identify the uniquely.
c) Intercompany Posting profile and its reciprocal. On this page set Originating company main account Debit/Credit, Journal which will be used for posting. Destination company main accounts debit/credit, Journal.
Posting
To make sure that intercompany accounting entries are posted, the User should make sure that the value in Company and Offset Company is different. The system will automatically post the Intercompany entries using the values set in the "posting profile".
Below are the few links where you can get a good example to refer to (Thanks to their Author ☺)
https://www.linkedin.com/pulse/microsoft-dynamics-365fo-intercompany-accounting-part-ali-danish/
https://docs.microsoft.com/en-us/learn/modules/intercompany-accounting-dyn365-finance/
10) Accrual Scheme
Accruals are used in accrual accounting to track revenue that is recognized in the period that it's earned, not when payment is received, and to track expenses (costs) that are recognized when they occur, not when payment is made.
Setup
Go to General ledger --> Journal setup --> Accrual schemes
For step by step setup refer below page
https://docs.microsoft.com/en-us/dynamics365/finance/general-ledger/tasks/create-accrual-schemes
Usage/Posting
On Ledger general screen, Click on Functions --> Ledger accruals --> Select the Accruals schemes --> Click on Transaction to view the division of the transaction. This step is important because then the only the system will book accrual entries as per the setup.
11) Allocation
Allocation is used to distribute amounts across multiple ledger account/ Dimensions combinations. They help ensure that expenses or revenues are charged to the correct object in accounting.
There are two ways to accomplish this
• Allocation term on the Main account override section
• Allocation Rules
Allocation Terms
This is a simple and straightforward method. To use this method, go to the Main account page in General Ledger Module. Under the Legal entity override grid, select the Legal entity for which you want to enable the allocation and check allocation option.
Once this option is enabled, Click on Allocation terms in the grid menu. Fill in Source Financial Dimension Selection criteria and provide Destination Ledger account and dimensions combination where amount needs to be allocated. Amount gets allocated base on the percentage defined by the user.
Allocation Rules
This is another way to allocate the amount across multiple/single ledger account/dimension combinations.
Setup
General Ledger --> Allocations --> Ledger Allocation Rule
· General – This component is where the user specifies options such as the allocation method, intercompany rule settings, and whether the rule is active.
· Source – This component is where the user specifies the source data for the allocation. Allocation can be based on ledger balances (Data source = Ledger) or fixed amounts (Data source = Fixed value). When Data source is set to Ledger, source filter criteria must be defined for the ledger allocation rule (for example, for the advertising expenses).
· Destination – This component defines how the result of the allocation calculation should be distributed and accounted for. For example, there can be one destination line for each department.
· Offset – This component defines how main accounts and dimensions should be determined for the offset entries that balance the destination entries. User-defined options are typically used instead of accounts and dimensions that are based on the source. When Data source is set to Fixed value, Source can't be used as an option.
· Ledger allocation basis rules – These rules use their own source filter criteria to determine which ledger balances should be used for allocation (for example, the revenue per department). Each allocation basis rule can be used with multiple allocation rules.
Process
Go to General Ledger > Allocations > Process Allocation Request > Select required parameters > Click Ok
This process will generate Allocation lines. Now go to General Ledger > Allocations > Allocation Journal > Lines here user can validate the entries and post the journal
12) What is Contra Entries
13) What are Interim Accounts
Interim accounts are the main account used to park the value temporarily or only for a specific period. Below are a few examples
- Booking of Interim Tax until payment of the invoice is made.
- Cheque clearing account.
- Accrual off-set account.
14) What are control accounts
Accounts, where entries can be only posted through sub-ledger accounts, are known as control account. Different type of control accounts available in dynamics are as follow
- Customer
- Vendor
- Fixed Asset
- Bank
- Project
- Inventory
15) How to avoid manual entry in any ledger account
In D365, Go to General Ledger--> Chart of Accounts --> Accounts --> Main Account in Administrator group --> Enable “Do not allow Manual entries” check boxSimilarly, if the Balance control account in the Main account form is set to “Credit”, the system will make sure that the total balance of the Ledger account should not go in negative i.e., credit. While posting the journal, if any of the condition is violated, then the system will throw an error.
17) Balance Control Accounts
Setup:
Go to General ledger > Chart of accounts > Accounts > Balance control accounts and add the Ledger account on which Balance control needs to be activated.
Process:
On the General Journal Lines form (In my case I am using GL Journal however this functionality is not limited to GL only) once the user has created a new line with the account which is part of the Balance Control account form, Then the user can click Inquires > Balance Control. The form is divided in to below 4 segments
Header | Description |
Before journal | Balance before posting the journal that the user currently created. |
Transactions | Balance in the journal that the user has currently created. |
After journal | Balance after deducting Transactions amount from Before journal amount. |
Other journals | Balances that will be deducted from Before journal Balance from other unposted journals. |
After other journals | Before journal – (Transactions + Other journals) |
18) Golden Rules of Accounting
A Real Account is a general ledger account relating to Assets and Liabilities other than people accounts. These are accounts that don’t close at year-end and are carried forward. An example of a Real Account is a Bank Account.Debits what come in and Credit what go out
A Personal Account is a General ledger account connected to all persons like individuals, firms, and associations. An example of a Personal Account is a Creditor Account.
Debit the Receiver and credit the Giver
A Nominal account is a General ledger account pertaining to all income, expenses, losses and gains. An example of a Nominal Account is an Interest Account.
Debit expense and losses Credit Income and gain
19) Consolidation
In business, consolidation or amalgamation is the merger and acquisition of many smaller companies into a few much larger ones. In the context of financial accounting, consolidation refers to the aggregation of financial statements of a group company as consolidated financial statements.
Please refer to the below link for more details
Quick summary setup and the process is as below
Setup
Base on the method you select for consolidation, setup may vary.
Three ways to do consolidation
On-Line Consolidation: This can be used if your subsidiaries Legal entity and consolidation legal entity on the same database.
Off-Line consolidation: This can be used if your subsidiaries Legal entity and consolidation legal entity are on different applications/databases.
Management Reporter: This is a kind of consolidation, not actual entries are consolidated but an MR report is created based on the business logic which gives an overview of what figures should look like once consolidation is done.
Setup in Subsidiaries LE
- Blank setup: Default consolidation account can be left "Blank"
- Default Consolidation Account: Specific account from consolidation company where entries should be pushed.
- Consolidation Account Group: Create a separate consolidation group with mapping between the main account of subsidiaries' legal entity and consolidation legal entitles.
Setup in Consolidation LE
Create a new Legal entity and mark it as a consolidation company from Organization Admin > Organization > Legal Entities > General tab > Use for financial consolidation Yes
Process
- Go to your Consolidation company Consolidation module Consolidation online (in case of online) or Consolidation import (in case of offline).
- Enter the range of account (you can leave it blank)
- Use consolidation account (Yes/No) if yes then select from the Main account or Consolidation group.
- Select the date range for consolidation
- Select weather Budget figures need to be considered while consolidating.
- Select whether to rebuild the balances.
- Select how do we want to treat financial dimensions
- Select the Legal entities to involve in Consolidation
- Select the currency and select Elimination should be proposed or posted.
For Balance sheet items, the closing rate should be used and for P&L items, the average rate should be used.
20) Intercompany Elimination
Elimination of transactions is required when a parent company conducts business with one or more subsidiary companies and uses consolidated financial reporting.
Some transactions that occur between the companies must be eliminated because consolidated financial statements must only include transactions that occur between the consolidated entity and the other entities that are outside the consolidated group. Because of this requirement, transactions between a parent company and its subsidiary companies must be removed or eliminated.
Predefined elimination rules create elimination transactions in a company that is specified as the destination company for eliminations. You can generate the elimination journals during the consolidation process or by using an elimination journal proposal.
21) Purchases order life cycle
Purchases order creation > Confirm > Received > Invoiced
Confirm: PO list page, click on PO > Confirm
Received: PO list page click of Received > Product Receipt > Select quantity and enter Product Receipt no. and click Ok
Invoice: PO list page click on "Invoice > Generate Invoice > Enter Invoice no." and click on Ok.
Accounting Entries
Product Receipt
Ledger | DR | CR |
Purchase expenditure, un-invoiced | XX |
|
Purchase, accrual |
| XX |
Invoice
Ledger | DR | CR |
Purchase expenditure, un-invoiced |
| XX |
Purchase, accrual | XX |
|
Purchase expenditure for expense | XX |
|
Tax | XX |
|
Vendor Balance |
| XX |
22) Accounting entries for Fixed assets
Acquisition
Ledger | Dr | Cr |
Fixed Asset | XX |
|
Vendor Balance |
| XX |
Depreciation
Ledger | DR | CR |
Depreciation Expense | XX |
|
Accumulated Depreciation |
| XX |
Sale of FA
Ledger | DR | CR |
Customer | XX |
|
Accumulated Depreciation | XX |
|
Fixed Assets |
| XX |
Gain on FA |
| XX |
22) Bank Reconciliation
A bank reconciliation statement is a document that compares the cash balance on a company’s balance sheet to the corresponding amount on its bank statement. Reconciling the two accounts helps identify whether accounting changes are needed. Bank reconciliations are completed at regular intervals to ensure that the company’s cash records are correct. They also help detect fraud and any cash manipulations.
Process
- Go to Cash and bank management > Bank Accounts > Bank accounts. Select the bank account to reconcile with the bank statement and select Reconcile > Account reconciliation.
- Enter information in the Bank statement date and Bank statement fields. In the Ending balance field, you can enter the balance of the bank account as it appears on the bank statement.
- Select Transactions to open the Account reconciliation page.
- For each transaction that is included on the bank statement, select the Cleared check box if the amount in Dynamics 365 Finance corresponds to the amount on the bank statement. You can also enter or modify the value in the Bank transaction type field. This field value is important for bank transaction statistics and for some reports.
- You cannot close the bank reconciliation until the Unreconciled item is zero.
- You have the option to mark the transaction with check interval or deposit slip.
23) Advance Bank Reconciliation
https://www.dynamicpeople.nl/en/news/save-time-advanced-bank-reconciliation-dynamics-365-finance/#
24) How to block Bank for future use.
Go to Cash and Bank management > Bank accounts > Bank accounts > Select bank account > In General tab select “Active for all transaction”, “Inactive for all Transaction” or “Inactive for new Transaction”
25) Different Type of Depreciation method in Fixed assets
- Straight Line service life
- Straight Line remaining life
- Factor
- Consumption
- Manual
- 125% reducing balance
- 150% reducing balance
- 175% reducing balance
- 200% reducing balance
26) What is the Fixed asset Book/Value model
Each book tracks an independent financial lifecycle of an asset. Books can be configured to post associated transactions to the general ledger. This configuration is the default setting because it's typically used for corporate financial reporting. Books that don't post to the general ledger post only to the Fixed asset sub-ledger and are typically used for tax reporting purposes.
So, we create a Depreciation profile and attach it to Books. Book is attached to Fixed asset group and Fixed asset group is attached to individual Fixed asset.
Fixed asset Book and Group are used to configure the posting profile where the transaction will be posted.
27) How to split FA
Go to Fixed assets > Fixed assets > Fixed assets > Select your FA and click on Book on Action pane > Now click on Functions > Split Fixed asset
Enter To Fixed assets, To Book, Transaction date for the split, Percentage that needs to be split, and Journal Name and click on Ok.
28) How to change the group of FA
Go to Fixed assets > Fixed assets >Fixed assets > Select FA and click on “Change fixed assets group” Enter New group set “New FA number” to yes and click on Ok.
29) How to change Dimension for FA
Go to Fixed assets > Fixed assets > Fixed assets > Select FA and click on “Transfer Fixed asset”
Popup will appear where the user can select the destination Dimension where FA needs to be transferred and click on Update
Optionally the user can provide the reason for the transfer in the “Transfer comment” section.
Please refer: https://docs.microsoft.com/en-us/dynamicsax-2012/appuser-itpro/transfer-fixed-assets
https://docs.microsoft.com/en-us/dynamics365/finance/fixed-assets/tasks/transfer-fixed-asset
30) What are different way to acquire FA
Very good and so helpful
ReplyDeleteThanks
DeleteExcellent content..Thanks..
ReplyDelete