Styles and Templates
Styles are named collections of formatting that let you apply consistent appearance and enable structural features like navigation and automatic tables of contents. Candidates must distinguish paragraph styles, character styles, linked styles, table styles, and list styles, and understand style inheritance (a style based on another inherits its settings until overridden). Know direct formatting versus style formatting: direct formatting overrides the style and is the usual cause of inconsistent documents. Understand the Normal (default) style as the base of most inheritance chains, and how modifying it cascades.
Templates (.dotx) store styles, page setup, headers/footers, and boilerplate content for reuse. A candidate should know how to create a template from an existing document, where templates are stored, and that a document attached to a template can update its styles from it. The Styles pane and Style Inspector reveal what formatting is applied and where it comes from.
Traps: questions that ask why a heading won't appear in the navigation pane or TOC - usually because it was formatted manually rather than with a Heading style. Another trap is assuming deleting a style removes its formatting from text; text typically reverts to its base style. Also watch for confusion between modifying a style (updates all users of it) and updating a style to match selection.
Rule of thumb: If you will format more than one paragraph the same way, make it a style; if you will reuse the whole document's setup, make it a template.