Level 2 exam — Finance & Accounting

Exam — fresh questions

12 fresh questions to validate the financial statements: balance sheet, income statement, inventory, notes and taxable profit.
Answer everything, then click Check: your score and explanations will appear.

2.1 · Recall

1. What does the balance sheet show?

Detail of wages paid The past year's activity Assets at a date (assets / liabilities) The VAT amount owed

Snapshot at closing: what the business owns (assets) and owes (liabilities). Activity is the income statement.

2.1 · Application

2. Rachid is profitable but overdrawn. Where does his profit sit?

In cash (assets) In trade receivables In depot inventory In equity (liabilities)

Profit enriches equity on the liabilities side; it is not cash in the bank. Profitable without cash: receivables, inventory, investment.

2.1 · Recall

3. What is NOT on the balance sheet's assets side?

Equity Trade receivables Inventory Cash

Equity sits on the liabilities side (with debts): it says where money comes from, not what you own.

2.2 · Recall

4. What does the income statement measure?

Wealth at a date Performance (income − expenses) over the year The bank account balance The debt amount

A “film” of the year's activity; the balance sheet is a “photo” of wealth at closing.

2.2 · Application

5. Which profit reveals the core business's true performance?

Financial profit alone The balance-sheet total Exceptional profit Operating profit

Excluding financial and exceptional items, operations reflect durable current-business performance.

2.2 · Arbitration

6. Rachid's net profit comes from an exceptional sale, operations break even. Reading?

Deceptive signal: exceptional won't repeat Proof of a strong trading margin Reason to ignore the balance sheet Durable health: net says it all

Net driven by exceptional items hides fragile operations: look at operations before net.

2.3 · Recall

7. What is depreciation?

An anticipated uncertain risk Spreading an asset's cost over its life A supplier debt A fixed-asset sale

Depreciation spreads foreseeable wear; provision anticipates uncertain risk.

2.3 · Application

8. A Rachid customer may not pay. What to record?

A fixed asset Customer depreciation A provision (prudence) Extra income

Probable but uncertain loss = provision, out of prudence — without waiting for it to become final.

2.4 · Application

9. Rachid's banker reads the notes first. What is he looking for?

Wage detail The day's bank balance The exact VAT amount Methods, debt maturities and commitments

The notes give the true and fair view: methods, details behind totals, off-balance-sheet commitments invisible elsewhere.

2.4 · Arbitration

10. Do all companies produce full notes?

No: scaled to size (simplified or exemption) No, never any Yes, except large ones Yes, always identical

Proportionality: detailed for large entities, simplified or even waived for small ones.

2.5 · Application

11. Is a fine paid by the business tax-deductible?

Yes, like any expense No: add it back (base rises) Yes, it lowers the base Only if it is large

Real but non-deductible expense: added back to taxable profit, which may exceed accounting profit.

2.5 · Arbitration

12. Accounting €50,000, fine added back €5,000, non-taxable item €2,000. Tax base?

€48,000 (everything deducts) €50,000 (the stated profit) €53,000 (accounting + add-backs − deductions) €55,000 (everything adds up)

Taxable = 50,000 + 5,000 − 2,000 = €53,000: tax is computed on the restated figure, never the raw stated one.

What's next?

Score ≥ 80%: move on to Level 3 — V3 (intermediate balances, ratios, working capital, break-even, cash-flow plan).
Score < 80%: re-read the explanations above — each re-explains the concept — then redo the 48h challenges of the 5 sections (balance sheet, income, inventory, notes, tax).