ATD Level II: Financial Accounting, Quantitative Methods, Management and Public Finance
What the level tests
Level II moves from recording to reporting and analysis. Expect financial accounting for sole traders, partnerships and simple companies; business mathematics and statistics; management principles; and public finance and taxation fundamentals.
Concepts to master
In financial accounting, learn partnership appropriation accounts, admission and retirement adjustments, company share capital and basic financial statements, depreciation methods, accruals and prepayments, and ratio analysis. In quantitative methods, know simple and compound interest, discounting, index numbers, averages, dispersion and probability rules. In management, distinguish planning, organising, leading and controlling, and know span of control and delegation. In public finance, follow the budget cycle, sources of government revenue and the purpose of taxation; know direct versus indirect tax.
Traps
Partnership questions often hide a salary or interest on capital in the appropriation account - these are not expenses in the profit or loss. In statistics, do not use the mean for skewed data without comment, and do not confuse standard deviation with variance. In management, 'authority' is not the same as 'responsibility'. In tax, distinguish taxable income from accounting profit.
Worked rule
For partnership profit sharing, use this sequence: net profit add interest on drawings, then less salaries and interest on capital, then share the residual in the profit-sharing ratio. Example: profit 120,000; salary 30,000; interest on capital 20,000; residual 70,000 shared 2:3 gives 28,000 and 42,000. Always show the appropriation account, not an expense account.