Question

1. True or False: Unlimited liability is a major disadvantage of a sole proprietorship.

2. True or False: The amount of Net Income is the end result of a balance sheet.

3.     Multiple Choice: The _____________ indicates what the firm owns and how these assets are financed in the form of liabilities and ownership interest (“Snapshot”).

1. Income Statement
2. Balance Sheet
3. Cash Flow Statement
4. None of the above

4. Which of the following forms of business offers limited liability
5. 1. Sole Proprietorship
   2. Partnership
   3. Corporation
   4. None of the above

5. Multiple Choice: Fixed assets are usually financed with _____________ funds.
   1. Short-Term
   2. Long-Term
   3. Permanent
   4. None of the above

Answer 1

True. Unlimited liability is a major disadvantage of a sole proprietorship. Because the sole proprietor is personally liable for all the liabilities. The seperate entity concept does not apply here. Whereas in case of corporation and LLC the liability is limited.

FalseThe amount of Net Income is not the end result of a balance sheet.Net income is end result of income statements. Income statements contains information about the  incomes and expenses and balance sheet contains information of assets and liabilities.

3 B.Blance sheet indicates what the firm owns and how these assets are financed in the form of liabilities and ownership interest

Becasue

A Income Statement - Income statements contains information about the  incomes and expenses so A is incorrect

C. Cashflow statement- This indicates how the cash is managed by the company

4.Which of the following forms of business offers limited liability- answer C.Corporation

In order to have limited liability then the seperate entity concept should apply so that one may not be personally liable. Seperate entity concept applies for only corporations and LLC. Partnership and sole proprietorship offers unlimited liability as seperate entity concept is not applicable

5. Fixed assets are usually financed with Long term funds.

Because short term funds are those that need to be repaid at earliest and they are mostly used for working capital requirements.

Permanent funds does not exists in the entity beacuse every amount earned by the entity and the share capital need to be repaid if the business is closed