Certified Management Accountant Exam
Part 1 UPDATED QUESTIONS AND
CORRECT ANSWERS
What major categories appear on a balance sheet? - CORRECT ANSWER Assets, Liabilities
and Equity
What is the difference between a balance sheet in the account form vs the report form? - CORRECT
ANSWER The account form lists assets on the left with equities on the right whereas the report
form lists assets at the top and equity on the bottom.
What are the differences of balance sheet in the financial position form vs. account or report forms? -
CORRECT ANSWER It shows net working capital (by backing out current liabilities from
current assets), adds in noncurrent assets, backs out noncurrent liabilities, and nets to stockholder's
equity.
What are the sub categories of assets on a corporate balance sheet? - CORRECT ANSWER
Current assets; investments; property, plant and equipment; intangible assets; other assets
What is the SFAC 6 definition of asset? - CORRECT ANSWER Probable future economic
benefits obtained or controlled by a particular entity as a result of past transactions or events
What is the SFAC 6 definition of a liability? - CORRECT ANSWER Probable future sacrifices
of economic benefits arising form present obligations to transfer assets or provide services to other
entities as a result of past transactions
What are the sub categories of liabilities on a corporate balance sheet? - CORRECT ANSWER
Current & Noncurrent
What are the sub categories of equity on a corporate balance sheet? - CORRECT ANSWER
Contributed capital; par/stated value; amounts in excess of par/state value; donated capital;
capital arising from asset revaluation; retained earnings; treasury stock, accumulated other
comprehensive income
,What is the SFAC 6 definition of equity? - CORRECT ANSWER The residual interest in the
assets of an entity that remains after deducting its liabilities. For a corporation, equity is the ownership
interest (identified as "stockholders' equity")
Offsetting of assets & liabilities is improper except where a right of setoff exists. What conditions
must be met for a right of setoff to exist? - CORRECT ANSWER 1. Each of the two parties
owes the other determinable amounts.
2. The reporting party has the right to set off the amount owed with the amount owed by the other
party.
3. The reporting entity intends to set off.
4. The right of setoff is enforceable at law.
What is another name for an income statement? - CORRECT ANSWER Statement of profit or
loss
How can enterprises report items of other comprehensive income?(which is required) - CORRECT
ANSWER Either at the bottom of the income statement following net income; on the statement
of changes in stockholders equity; or on a separate statement
Revenue - CORRECT ANSWER Inflows of assets or settlements of liabilities, during a period,
from delivering or producing goods, rendering services, or other activities that constitute the entity's
ongoing major or central operations
Expenses - CORRECT ANSWER Outflows of assets or incurrences of liabilities, during a
period, from delivering or producing goods, rendering services or other activities that constitute the
entity's ongoing major or central operations
Gains - CORRECT ANSWER Increases in net assets other than from revenues or investments
by owners
Losses - CORRECT ANSWER Decreases in net assets other than from expenses or
withdrawals by owners
Income - CORRECT ANSWER The result of combining these four concepts for specified
period of time (sometimes referred to as earnings): Income=Revenues-Expenses+Gains-Losses
,Gains and losses relate to... - CORRECT ANSWER peripheral or secondary activities rather
than major or central operations
How are gains/losses presented on an income statement? - CORRECT ANSWER In net
amounts
How are revenues/expenses presented on the income statement? - CORRECT ANSWER In
gross amounts
What are the 2 income statement formats? - CORRECT ANSWER Single step or multiple step
How is a single step income statement presented? - CORRECT ANSWER Revenues and gains
are combined at the top, from this subtotal, a total of all expenses and losses is deducted to render net
income. It is common to see income taxes separate from other expenses, resulting in an income figure
before taxes. Taxes are then deducting, giving you net income
How is a multiple step income statement presented? - CORRECT ANSWER A distinction is
made between operating and nonoperating items. Typically, COGS is deducted from revenues to yield
gross profit; selling and admin expenses are then deducted to get operating income; and other income
and expense items are added/deducted to yield net income.
What are the components of a Statement of Changes in Stockholders Equity? - CORRECT ANSWER
1. Column headings identify individual stockholder equity accounts
2. Events changing stockholders equity accounts are listed chronologically to the left
3. The body of the statement is presented in terms of the dollar impact of various transactions and
events
4. The impact of the transactions on the number of shares is indicated in the descriptions on the left
5. The ending balance ties to the items presented in the stockholders equity section of the balance
sheet on the same dates
What are the 3 sections presented in a Statement of Cash Flows? - CORRECT ANSWER Cash
flows from:
operating
investing
, financing
In that order
What is the primary purpose of a Statement of Cash Flows? - CORRECT ANSWER To
provide information about the cash receipts and cash payments of the enterprise
How is IFRS IAS 7 Cash Flow Statement similar/different than a GAAP statement? - CORRECT
ANSWER Bank overdrafts are considered operating activities; cash flow from the acquisition
or disposal of a subsidiary is presented separately as an investing activity; interest & dividends
received are reported as operating or investing activities; noncash investing and financing activities
are not reported on the cash flow statement but are disclosed in notes
Is the Statement of Cash Flows presented in net or gross amounts? - CORRECT ANSWER
Gross; except in cases where turnovers are quick, amounts are large, and maturities are short
What does ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash require? -
CORRECT ANSWER That the change during the period in the total of cash, cash equivalents,
restricted cash, and restricted cash equivalents must be explained; therefore, restricted cash amounts
are included with cash when reconciling the beginning and ending period amounts on the SCF
Cash equivalents are - CORRECT ANSWER short term, highly liquid investments that are
readily converted to known amounts of cash and are so near maturity that they represent insignificant
risk of changes in value due to changes in interest rates. (generally, only investments with maturities
of 3 months or less qualify as cash equivalents ex. Treasury bills, commercial paper, money market
funds, and federal funds sold
What 2 areas does ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting cover? - CORRECT ANSWER 1. Excess tax
benefits resulting from a share-based payments are now classified along with other income tax cash
flows as an operating activity
2. Employee taxes paid when an employer withholds shares for tax-withholding purposes are
classified as a financing activity
What items are covered in ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of
Certain Cash Receipts and Cash Payments? - CORRECT ANSWER 1. Debt prepayment or
debt extinguishment costs: financing outflows
Part 1 UPDATED QUESTIONS AND
CORRECT ANSWERS
What major categories appear on a balance sheet? - CORRECT ANSWER Assets, Liabilities
and Equity
What is the difference between a balance sheet in the account form vs the report form? - CORRECT
ANSWER The account form lists assets on the left with equities on the right whereas the report
form lists assets at the top and equity on the bottom.
What are the differences of balance sheet in the financial position form vs. account or report forms? -
CORRECT ANSWER It shows net working capital (by backing out current liabilities from
current assets), adds in noncurrent assets, backs out noncurrent liabilities, and nets to stockholder's
equity.
What are the sub categories of assets on a corporate balance sheet? - CORRECT ANSWER
Current assets; investments; property, plant and equipment; intangible assets; other assets
What is the SFAC 6 definition of asset? - CORRECT ANSWER Probable future economic
benefits obtained or controlled by a particular entity as a result of past transactions or events
What is the SFAC 6 definition of a liability? - CORRECT ANSWER Probable future sacrifices
of economic benefits arising form present obligations to transfer assets or provide services to other
entities as a result of past transactions
What are the sub categories of liabilities on a corporate balance sheet? - CORRECT ANSWER
Current & Noncurrent
What are the sub categories of equity on a corporate balance sheet? - CORRECT ANSWER
Contributed capital; par/stated value; amounts in excess of par/state value; donated capital;
capital arising from asset revaluation; retained earnings; treasury stock, accumulated other
comprehensive income
,What is the SFAC 6 definition of equity? - CORRECT ANSWER The residual interest in the
assets of an entity that remains after deducting its liabilities. For a corporation, equity is the ownership
interest (identified as "stockholders' equity")
Offsetting of assets & liabilities is improper except where a right of setoff exists. What conditions
must be met for a right of setoff to exist? - CORRECT ANSWER 1. Each of the two parties
owes the other determinable amounts.
2. The reporting party has the right to set off the amount owed with the amount owed by the other
party.
3. The reporting entity intends to set off.
4. The right of setoff is enforceable at law.
What is another name for an income statement? - CORRECT ANSWER Statement of profit or
loss
How can enterprises report items of other comprehensive income?(which is required) - CORRECT
ANSWER Either at the bottom of the income statement following net income; on the statement
of changes in stockholders equity; or on a separate statement
Revenue - CORRECT ANSWER Inflows of assets or settlements of liabilities, during a period,
from delivering or producing goods, rendering services, or other activities that constitute the entity's
ongoing major or central operations
Expenses - CORRECT ANSWER Outflows of assets or incurrences of liabilities, during a
period, from delivering or producing goods, rendering services or other activities that constitute the
entity's ongoing major or central operations
Gains - CORRECT ANSWER Increases in net assets other than from revenues or investments
by owners
Losses - CORRECT ANSWER Decreases in net assets other than from expenses or
withdrawals by owners
Income - CORRECT ANSWER The result of combining these four concepts for specified
period of time (sometimes referred to as earnings): Income=Revenues-Expenses+Gains-Losses
,Gains and losses relate to... - CORRECT ANSWER peripheral or secondary activities rather
than major or central operations
How are gains/losses presented on an income statement? - CORRECT ANSWER In net
amounts
How are revenues/expenses presented on the income statement? - CORRECT ANSWER In
gross amounts
What are the 2 income statement formats? - CORRECT ANSWER Single step or multiple step
How is a single step income statement presented? - CORRECT ANSWER Revenues and gains
are combined at the top, from this subtotal, a total of all expenses and losses is deducted to render net
income. It is common to see income taxes separate from other expenses, resulting in an income figure
before taxes. Taxes are then deducting, giving you net income
How is a multiple step income statement presented? - CORRECT ANSWER A distinction is
made between operating and nonoperating items. Typically, COGS is deducted from revenues to yield
gross profit; selling and admin expenses are then deducted to get operating income; and other income
and expense items are added/deducted to yield net income.
What are the components of a Statement of Changes in Stockholders Equity? - CORRECT ANSWER
1. Column headings identify individual stockholder equity accounts
2. Events changing stockholders equity accounts are listed chronologically to the left
3. The body of the statement is presented in terms of the dollar impact of various transactions and
events
4. The impact of the transactions on the number of shares is indicated in the descriptions on the left
5. The ending balance ties to the items presented in the stockholders equity section of the balance
sheet on the same dates
What are the 3 sections presented in a Statement of Cash Flows? - CORRECT ANSWER Cash
flows from:
operating
investing
, financing
In that order
What is the primary purpose of a Statement of Cash Flows? - CORRECT ANSWER To
provide information about the cash receipts and cash payments of the enterprise
How is IFRS IAS 7 Cash Flow Statement similar/different than a GAAP statement? - CORRECT
ANSWER Bank overdrafts are considered operating activities; cash flow from the acquisition
or disposal of a subsidiary is presented separately as an investing activity; interest & dividends
received are reported as operating or investing activities; noncash investing and financing activities
are not reported on the cash flow statement but are disclosed in notes
Is the Statement of Cash Flows presented in net or gross amounts? - CORRECT ANSWER
Gross; except in cases where turnovers are quick, amounts are large, and maturities are short
What does ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash require? -
CORRECT ANSWER That the change during the period in the total of cash, cash equivalents,
restricted cash, and restricted cash equivalents must be explained; therefore, restricted cash amounts
are included with cash when reconciling the beginning and ending period amounts on the SCF
Cash equivalents are - CORRECT ANSWER short term, highly liquid investments that are
readily converted to known amounts of cash and are so near maturity that they represent insignificant
risk of changes in value due to changes in interest rates. (generally, only investments with maturities
of 3 months or less qualify as cash equivalents ex. Treasury bills, commercial paper, money market
funds, and federal funds sold
What 2 areas does ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting cover? - CORRECT ANSWER 1. Excess tax
benefits resulting from a share-based payments are now classified along with other income tax cash
flows as an operating activity
2. Employee taxes paid when an employer withholds shares for tax-withholding purposes are
classified as a financing activity
What items are covered in ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of
Certain Cash Receipts and Cash Payments? - CORRECT ANSWER 1. Debt prepayment or
debt extinguishment costs: financing outflows
