This paper reports young (3–5 year-olds’) children’s cognitive and affective understanding of actual moral (harm to others) and prudential (harm to self) transgressions in the family, as reported by the parent, but in a way that provides the child the opportunity to reflect on and reason about the actual events. A total of 38 parent–child dyads participated. Findings illuminate different levels of moral understanding during preschool years. Specifically, there was a sharp break between the understanding of 3 and 4–5 year-olds for both transgressions. However, across all age groups, the rate of increased relevance of the reasoning to the act was greater for prudential than for moral transgressions, and the understanding of own feelings as an agent of the transgression developed more slowly in the moral than the prudential domains. Unexpectedly, many 3 year-olds failed to understand the dangers inherent in prudential transgressions.