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 primary impact of incorporating a business?

The business is required to pay personal income tax instead of corporate tax.

The business cannot raise capital by issuing shares.

The business becomes a separate legal entity from its owners.

The owners have unlimited liability for business debts.

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Verified step by step guidance

Understand the concept of incorporation: Incorporating a business means forming a corporation, which is a legal entity separate from its owners. This separation has significant implications for liability, taxation, and capital raising.

Clarify the tax implications: When a business is incorporated, it pays corporate taxes on its profits rather than personal income tax. This is because the corporation is treated as a separate legal entity.

Examine the ability to raise capital: Incorporated businesses can raise capital by issuing shares to investors, which is a key advantage of incorporation. This is not possible for unincorporated businesses like sole proprietorships or partnerships.

Analyze liability: Incorporation limits the liability of the owners (shareholders). Owners are not personally responsible for the debts of the corporation; their liability is limited to their investment in the company.

Identify the correct statement: Based on the above points, the primary impact of incorporating a business is that it becomes a separate legal entity from its owners, which is the correct answer provided in the problem.