Multiple Choice
Which type of accounting is primarily focused on helping organizations achieve their long-term financial goals by providing information for planning and decision-making?
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1. Introduction to Accounting
Types of Accounting
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Which type of business entity pays income taxes on the sales of its products each year?
A
Sole proprietorship
B
Nonprofit organization
C
Corporation
D
Partnership
Verified step by step guidance1
Understand the types of business entities listed in the problem: Sole proprietorship, Nonprofit organization, Corporation, and Partnership.
Learn the tax implications for each entity: Sole proprietorship and Partnership do not pay income taxes directly; instead, profits are passed through to the owners who report them on their personal tax returns. Nonprofit organizations are generally exempt from income taxes if they meet specific criteria.
Recognize that a Corporation is a separate legal entity and is required to pay income taxes on its profits. This is distinct from the other entities where taxes are passed through to individuals.
Review the concept of 'double taxation' for Corporations: Corporations pay taxes on their profits, and shareholders may also pay taxes on dividends received.
Conclude that the correct answer is Corporation, as it is the type of business entity that pays income taxes on the sales of its products each year.
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