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

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

To what extent are a corporation’s shareholders liable for the corporation’s debts?

They are not liable at all, regardless of their investment

They are liable for twice the amount they have invested

They are personally liable for all of the corporation’s debts

Only up to the amount they have invested in the corporation

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Verified step by step guidance

Understand the concept of limited liability: In a corporation, shareholders benefit from limited liability, meaning their personal assets are protected from the corporation's debts.

Recognize the distinction between ownership and liability: Shareholders own shares in the corporation, but their liability is limited to the amount they have invested in purchasing those shares.

Compare the options provided: Analyze each option to determine which aligns with the principle of limited liability. For example, 'They are not liable at all' is incorrect because shareholders are liable up to their investment amount.

Focus on the correct principle: The correct answer is 'Only up to the amount they have invested in the corporation,' as this reflects the limited liability structure of corporations.

Conclude with the importance of limited liability: This principle encourages investment in corporations by reducing personal financial risk for shareholders.