Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Characteristics of a Corporation

Financial Accounting

12. Stockholders' Equity

Characteristics of a Corporation

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Multiple Choice

Which of the following is a characteristic of a corporation?

Ownership is not transferable

Direct management by all shareholders

Unlimited life of the owner

Limited liability of shareholders

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Verified step by step guidance

Step 1: Understand the concept of a corporation. A corporation is a legal entity that is separate from its owners (shareholders). It has specific characteristics that distinguish it from other business structures like sole proprietorships or partnerships.

Step 2: Review the characteristic of 'limited liability of shareholders.' This means that shareholders are only liable for the corporation's debts up to the amount they have invested in the company. Their personal assets are protected from corporate liabilities.

Step 3: Compare the other options provided in the question. For example, 'Ownership is not transferable' is incorrect because shares in a corporation can typically be bought and sold, making ownership transferable. Similarly, 'Direct management by all shareholders' is incorrect because corporations are usually managed by a board of directors and executives, not all shareholders. 'Unlimited life of the owner' is also incorrect because corporations have an unlimited lifespan, independent of the life of any owner.

Step 4: Identify the correct answer based on the characteristics of a corporation. The correct answer is 'Limited liability of shareholders,' as this is a defining feature of corporations.

Step 5: Summarize the reasoning. Corporations are designed to protect shareholders from personal liability, allow for transferable ownership, and operate independently of the lifespan of any individual owner. These features make corporations distinct from other business structures.