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

1. Introduction to Accounting

Business Organization

Financial Accounting

1. Introduction to Accounting

Business Organization

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following is a disadvantage of operating as a sole proprietorship?

Complex and costly formation process

Ability to easily raise large amounts of capital

Unlimited personal liability for business debts

Double taxation of profits

Previous problemNext problem

Verified step by step guidance

Understand the concept of a sole proprietorship: A sole proprietorship is a business structure where a single individual owns and operates the business. It is the simplest and most common form of business ownership.

Identify the key characteristics of a sole proprietorship: These include ease of formation, complete control by the owner, and direct taxation of profits (no double taxation). However, the owner has unlimited personal liability for business debts.

Analyze the disadvantages of a sole proprietorship: The primary disadvantage is unlimited personal liability, meaning the owner is personally responsible for all debts and obligations of the business. This can put personal assets at risk.

Compare the options provided in the question: Evaluate each statement to determine which aligns with the disadvantages of a sole proprietorship. For example, 'Complex and costly formation process' is incorrect because sole proprietorships are easy to form. 'Ability to easily raise large amounts of capital' is incorrect because sole proprietorships often struggle to raise significant capital. 'Double taxation of profits' is incorrect because sole proprietorships are taxed directly, avoiding double taxation.

Conclude that the correct answer is 'Unlimited personal liability for business debts,' as this is the most significant disadvantage of operating as a sole proprietorship.