What you can learn from the Level 2 Examiner’s reports

This review is of the examiner’s reports that were published in October 2023 and has been written to help you familiarise yourself with the Level 2 Certificate in Accounting units. 

The reports “provide information on the performance of students in assessment tasks” and “are intended to be constructive, informative and promote a better understanding of the specification content and assessment requirements.”  They highlight key areas of strength and, more importantly, areas for improvement.  Therefore, they contain really useful nuggets of information.  Because if you know in general which topics/tasks most students find hard, you can use that information to guide your learning and revision and help you avoid common mistakes. Although, be careful not to neglect topics just because people generally perform well in them!

So, to motivate you to use them, here is a summary of the weak areas in each unit and links to other Comments* that will support your understanding of the topics.  The reports contain lots of extra information, so you are strongly encouraged to read them in full.  They can easily be found in the learning portal.

There are lots of Comment articles available and whilst most were originally written to cover tricky areas in the units for a previous set of standards, the key areas covered in your qualification are fundamentally the same and it is likely that you will still find the same areas difficult.  One of the biggest changes between the standards is the terminology so having an initial read of Accountancy Terminology: Here’s what you need to know and/or A bitesize glossary might be helpful. 

Introduction to Bookkeeping (ITBK)

Overall percentage of students achieving required competence level: 85%

Use of time: all tasks completed within 80% of the time available on average

Strongest tasks: 3 – Processing customer invoice or credit notes and entering in daybooks (with 98% reaching competency level) and 5 – Processing supplier invoice or credit notes and entering in daybooks (94%)

Tasks in need of improvement: 7 (62%) 8 (63%) and 9 (68%)

Competency in the other tasks: 1 (82%) 2 (71%) 4 (88%) 6 (84%) 10 (72%) and 11 (76%)

Areas of weakness:

Task 7 – Processing transactions in the cash book

• miscalculating net and VAT from VAT inclusive amounts
  • The explanations in the How to calculate VAT article should help
• incorrectly entering the total amount of a transaction into the digital bookkeeping system instead of entering the net amount and selecting the appropriate VAT code
• incorrectly identifying transactions as relating to cash sales or purchases instead of receivables or payables and vice versa
  • Try reading Understanding the cashbook: parts 1 & 2.

Task 8 – Processing transactions in the petty cash book

• miscalculating net and VAT from VAT inclusive amounts
  • As above: How to calculate VAT
• failing to balance the petty cash book correctly
• incorrectly identifying the amount required to top up the petty cash float in an imprest system

Task 9 – Processing recurring entries

• miscalculating the amount of the recurring receipt or payment
• miscalculating the number of recurring receipt or payment postings required
• incorrectly identifying the frequency of receipts or payments

Relevant articles

• Balancing a trial balance and correcting errors with journals: part 1
• Sales and purchases: 5 part series
• Ways to balance a T account
• How manual bookkeeping helps you use accounting software
• Discount types: 3 part series

Principles of Bookkeeping Controls (POBC)

Overall percentage of students achieving required competence level: 72%

Use of time: 76% used on average

Strongest tasks: 4 – Reconciling a bank statement with the cash book (76%) 7 – Extracting a trial balance (79%) and 8 – Redrafting a trial balance (89%)

Tasks in need of improvement: 2 (54%) and 6 (48%)

Competency in the other tasks: 1 (69%) 3 (62%) and 5 (61%)

Areas of weakness:

Task 2 – Reconciling control accounts

• miscalculating the total of the balances in the receivables and payables ledgers, particularly when negative balances were included
• identifying reasons why the total of the balances in the receivables and payables ledgers did not reconcile with the control accounts

Control accounts are explained in the Sales and purchases: 5 part series, especially in parts 4 and 5.

Task 6 – Using the journal to correct errors

• identifying by name the errors that do not affect the trial balance
  • The 3 part identifying and correcting errors series goes through types of errors, their names and whether they are disclosed by the trial balance or not.
• incorrectly identifying whether journal entries should be on the debit or credit side
• preparing journals that do not balance
  • There are a couple of articles about journals as it is a topic that lots of students find difficult. Journals focuses on avoiding getting the debits and credits the wrong way round.  You could also read Using a four line journal to correct errors, this goes through AAT’s standard correction method, however, you should be aware that you may need to net off journal entries in your assessment which is not done in this article.

Relevant articles

• Balancing a trial balance and correcting errors with journals: parts 1 & 2
• Payroll and the associated journal entries – note that journals can be written in a number of different ways and again you might have to net off payroll journal entries in your assessment which is not done in this article
• Tricky Topics Deciphered: Suspense accounts
• Applying the Foundation Certificate in Accounting to a business scenario: 4 part series

Principles of Costing (PCTN)

Overall percentage of students achieving required competence level: 70%

Use of time: 79% used on average

Strongest tasks: 1 – Classification and relationship of costs (84% competency), 2 – Costing techniques (76%), 3 – Recording costs (78%) and 5 – Calculating costs of products and using tools and techniques to improve the presentation of information (70%)

Tasks in need of improvement: 4 (61%), 6 (67%) and 7 (68%)

Areas of weakness:

Task 4 – Calculating overhead absorption rates and looking at the behaviour of costs

• total costs calculated rather than unit costs
• incorrect application of the overhead recovery rate to establish the correct unit/service cost
• incorrect calculations of fixed and variable costs when activity levels change
• limited understanding that variable costs per unit remain constant at different levels of output, and that fixed cost per unit decreases when activity levels increase
• unable to correctly identify cost behaviour from a description

Task 6 – Labour and inventory calculations

• incorrectly identifying the inventory valuation method used when presented with costing data
• incorrectly calculating the cost of issues and valuation of closing inventories using FIFO, AVCO and LIFO
• limited understanding of inventory control policy i.e. buffer stocks, reorder quantities and lead times
• incorrectly calculating shift allowances and overtime premium payments as part of total labour payments

Task 7 – Budget calculations and exception reporting using formulas

• adverse variances shown as favourable and vice versa
• some incorrect calculations of variances when expressing these as a percentage of budgeted costs and income
• incorrect interpretation of organisational policy when deciding the appropriate manager for reporting significant variances.

You should be aware that the assessment uses a spreadsheet style of question rather than spreadsheet software itself.  Therefore, if you have been using software, like Excel or Google sheets, as part of your studies, then tasks 5 and 7 will look similar but not exactly the same.  Try using the familiarisation resource on the learning portal to help you understand the difference.

Relevant articles

• Fixed variable and semi-variable costs
• Valuation of raw materials: 3 part series
• Costing terminology

The Business Environment Synoptic (BESY)

Overall percentage of students achieving required competence level: 65%

Use of time: 83% used on average

Strongest tasks: 1 – Different business types and their functions (81%) 3 – corporate social responsibility (CSR), ethics and sustainability (86%) and 8 – The external business environment (85%)

Tasks in need of improvement: 4 (52%) 5 (52%) 6 (57%) and 7 (37%)

Competency in the other task: 2 (74%)

Areas of weakness:

Task 4 – Processing bookkeeping transactions and communicating information

• accounting for discounts – understanding the difference between a trade discount and a prompt payment discount
• describing elements
• understanding the bookkeeping process including the purpose of books of prime entry, ledgers and financial statements
• bookkeeping transactions
  • See Comment suggestions for ITBK

Task 5 – Control accounts, reconciliations and using journals to correct accounts

• identifying unpresented cheques and outstanding lodgements
• identifying reasons for differences in control accounts
• processing journal entries when VAT and net amounts must be calculated from a gross figure
  • See Comment suggestions for POBC

Task 6 – The principles of contract law

• intention
• Remedies
• Have a look at Contract law and wallpaper: parts 1 & 2 to help you with this task  (Note that part 2 covers how contracts can be ended by frustration or agreement which are no longer assessed).

Task 7 – Bookkeeping systems, receipts and payments, and the importance of information and data security

• understanding that controls also exist in a digital bookkeeping system
• the role of payables and receivables ledger teams
• applying knowledge of digital systems in a scenario
  • How manual bookkeeping helps you use accounting software will give you some context
• accounting for irrecoverable debts
  • Understanding irrecoverable and doubtful debts is a level 3 article and covers more than you need for level 2 but it might be useful if you can just pick out the irrecoverable debt sections at the start without getting confused. 

This assessment is different to the others in the qualification as it is the level 2 qualification synoptic and includes topics covered in ITBK and POBC as well as the Business Environment unit.  It requires students to apply knowledge to scenario-based questions both in relation to answering multiple choice questions and providing written answers, neither of which should be underestimated.

Typically, students find written tasks difficult so it would be worth having a look at the writing skill e-learning unit and associated videos on the learning portal.  You could also have a read of How to apply active verbs part 1.

A couple of articles have been written to specifically support the Business Environment unit:

• Understanding supply and demand
• Uncertainty and risk: what’s the difference?

And the following article is also relevant:

• Identifying organisational initiatives that support sustainability

General comments and summary:

There are a couple of common themes that run through all of the level 2 examiners’ reports.  These include that examiners’ feel that some of the answers given suggest that students might not have read questions carefully, thereby missing or misunderstanding key information.   Also, not following the instructions in the task i.e. entering figures to the nearest whole pound or two decimal places when requested, is mentioned a couple of times, as is not attempting some elements of a task.  Therefore, regardless of which assessment you are sitting, be sure to take your time, read every question carefully and double check your calculations and answers before pressing submit.

*Note that articles published before September 2022 will have been written in line with the AQ16 specification therefore, they could use different terminology, for example, sales ledger/control account as opposed to receivables ledger/control account, but the theory will still be valid.

Gill Myers is a self-employed accounts consultant. She has taught AAT qualifications since 2005 and written numerous articles and e-learning resources.