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

Stockholders' liability for losses only up to the amount they invest is called:

Contingent liability

Joint liability

Limited liability

Unlimited liability

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Verified step by step guidance

Understand the concept of liability in the context of stockholders. Liability refers to the legal responsibility for debts or losses incurred by a business.

Learn about the term 'limited liability.' Limited liability means that stockholders are only responsible for the company's debts or losses up to the amount they have invested in the company. Their personal assets are protected.

Contrast 'limited liability' with other types of liability, such as 'unlimited liability,' where owners are personally responsible for all debts and losses of the business, potentially risking their personal assets.

Review the incorrect options: 'Contingent liability' refers to potential liabilities that may occur depending on the outcome of a future event, and 'joint liability' refers to shared responsibility among multiple parties for a debt or obligation.

Conclude that the correct answer is 'limited liability,' as it specifically describes the stockholders' protection from losses beyond their investment amount.