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

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Which of the following best describes a disadvantage of corporations related to shareholder taxation?

Shareholders must pay self-employment tax on corporate earnings.

Shareholders are personally liable for corporate debts.

Shareholders cannot transfer their shares freely.

Shareholders are subject to double taxation on corporate profits.

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Verified step by step guidance

Understand the concept of double taxation: Double taxation occurs when corporate profits are taxed at two levels—first at the corporate level when the company earns profits, and then at the individual level when shareholders receive dividends.

Recognize that corporations are separate legal entities: This separation means that the corporation itself pays taxes on its earnings, unlike sole proprietorships or partnerships where profits are taxed only at the individual level.

Identify how dividends are taxed: After the corporation pays taxes on its profits, any dividends distributed to shareholders are considered taxable income for the shareholders, leading to the second layer of taxation.

Compare this disadvantage to other options: Self-employment tax, personal liability for corporate debts, and restrictions on share transfer are not applicable disadvantages for corporations. Corporations provide limited liability protection and allow free transfer of shares.

Conclude that the correct disadvantage is double taxation: This is a unique feature of corporations that impacts shareholders directly, making it a key consideration in corporate taxation.