CERTIFIED MANAGEMENT ACCOUNTANT
PART 1 | QUESTIONS AND ANSWERS |
2026 UPDATE | WITH COMPLETE
SOLUTION
What is the SFAC 6 definition of equity? - ANSWERS-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? - ANSWERS-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? - ANSWERS-Statement
of profit or loss
How can enterprises report items of other comprehensive
income?(which is required) - ANSWERS-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 - ANSWERS-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 - ANSWERS-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 - ANSWERS-Increases in net assets other than from revenues or
investments by owners
Losses - ANSWERS-Decreases in net assets other than from expenses
or withdrawals by owners
What major categories appear on a balance sheet? - ANSWERS-Assets,
Liabilities and Equity
What is the difference between a balance sheet in the account form vs
the report form? - ANSWERS-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? - ANSWERS-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? -
ANSWERS-Current assets; investments; property, plant and equipment;
intangible assets; other assets
What is the SFAC 6 definition of asset? - ANSWERS-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? - ANSWERS-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? - ANSWERS-Current & Noncurrent
What are the sub categories of equity on a corporate balance sheet? -
ANSWERS-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
, Income - ANSWERS-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... - ANSWERS-peripheral or secondary
activities rather than major or central operations
How are gains/losses presented on an income statement? - ANSWERS-
In net amounts
How are revenues/expenses presented on the income statement? -
ANSWERS-In gross amounts
What are the 2 income statement formats? - ANSWERS-Single step or
multiple step
How is a single step income statement presented? - ANSWERS-
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? - ANSWERS-A
distinction is made between operating and nonoperating items.
Typically, COGS is deducted from revenues to yield gross profit; selling
PART 1 | QUESTIONS AND ANSWERS |
2026 UPDATE | WITH COMPLETE
SOLUTION
What is the SFAC 6 definition of equity? - ANSWERS-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? - ANSWERS-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? - ANSWERS-Statement
of profit or loss
How can enterprises report items of other comprehensive
income?(which is required) - ANSWERS-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 - ANSWERS-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 - ANSWERS-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 - ANSWERS-Increases in net assets other than from revenues or
investments by owners
Losses - ANSWERS-Decreases in net assets other than from expenses
or withdrawals by owners
What major categories appear on a balance sheet? - ANSWERS-Assets,
Liabilities and Equity
What is the difference between a balance sheet in the account form vs
the report form? - ANSWERS-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? - ANSWERS-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? -
ANSWERS-Current assets; investments; property, plant and equipment;
intangible assets; other assets
What is the SFAC 6 definition of asset? - ANSWERS-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? - ANSWERS-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? - ANSWERS-Current & Noncurrent
What are the sub categories of equity on a corporate balance sheet? -
ANSWERS-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
, Income - ANSWERS-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... - ANSWERS-peripheral or secondary
activities rather than major or central operations
How are gains/losses presented on an income statement? - ANSWERS-
In net amounts
How are revenues/expenses presented on the income statement? -
ANSWERS-In gross amounts
What are the 2 income statement formats? - ANSWERS-Single step or
multiple step
How is a single step income statement presented? - ANSWERS-
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? - ANSWERS-A
distinction is made between operating and nonoperating items.
Typically, COGS is deducted from revenues to yield gross profit; selling
