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

5. Inventory

Merchandising Company vs. Manufacturing Company

Financial Accounting

5. Inventory

Merchandising Company vs. Manufacturing Company

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Multiple Choice

Which of the following is a disadvantage of operating as a partnership?

Ability to issue shares to raise capital

Double taxation of profits

Complexity in forming the business

Unlimited liability for the partners

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Verified step by step guidance

Understand the concept of a partnership: A partnership is a business structure where two or more individuals share ownership, profits, and liabilities. Unlike corporations, partnerships do not issue shares or have limited liability protection.

Review the disadvantages of partnerships: Partnerships have several disadvantages, including unlimited liability, potential conflicts between partners, and difficulty in raising capital compared to corporations.

Focus on the key disadvantage mentioned in the problem: Unlimited liability means that each partner is personally responsible for the debts and obligations of the business. If the business incurs losses or debts, creditors can claim the personal assets of the partners.

Compare the other options provided: 'Ability to issue shares to raise capital' is not applicable to partnerships, as they cannot issue shares. 'Double taxation of profits' applies to corporations, not partnerships, since partnerships are taxed only once at the individual level. 'Complexity in forming the business' is not a significant issue for partnerships, as they are relatively simple to establish compared to corporations.

Conclude that the correct answer is 'Unlimited liability for the partners,' as this is a defining disadvantage of the partnership structure.