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

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Multiple Choice

Which of the following is a disadvantage to incorporating a business?

Unlimited liability for owners

Lack of continuity if an owner leaves

Double taxation of corporate profits

Limited ability to raise capital

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Verified step by step guidance

Understand the concept of incorporation: Incorporating a business means forming a separate legal entity (a corporation) that is distinct from its owners. This provides benefits such as limited liability for owners and continuity of the business even if an owner leaves.

Review the disadvantages of incorporation: While incorporation offers many advantages, it also has drawbacks. One major disadvantage is double taxation, where corporate profits are taxed at the corporate level and then taxed again when distributed as dividends to shareholders.

Analyze the incorrect options: Unlimited liability for owners is not a disadvantage of incorporation because owners of a corporation have limited liability. Similarly, lack of continuity if an owner leaves is not applicable to corporations, as they are designed to continue operating regardless of changes in ownership. Limited ability to raise capital is also incorrect, as corporations generally have greater ability to raise capital through issuing shares.

Focus on the correct answer: Double taxation of corporate profits is a key disadvantage of incorporation. This occurs because the corporation pays taxes on its earnings, and shareholders pay taxes on dividends received from those earnings.

Summarize the reasoning: Incorporation provides benefits like limited liability and continuity, but the disadvantage of double taxation makes it less appealing in certain situations. This is why 'Double taxation of corporate profits' is the correct answer.