COST ACCOUNTING
COST ACCOUNTING STANDARDS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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When the debts of a sole proprietorship or partnership are greater than its resources, the owner(s) is financially responsible
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The field of accounting that includes preparing tax returns and planning future transactions to minimize the amount of tax; involves private, public, and government accountants
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Detailed explanation-1: -Unlimited liability refers to the full legal responsibility that business owners and partners assume for all business debts. This liability is not capped, and obligations can be paid through the seizure and sale of owners’ personal assets, which is different than the popular limited liability business structure.
Detailed explanation-2: -In contrast with limited liability, unlimited liability refers to business owners who are legally liable for any debt their business might accrue. There’s no maximum amount of debt that is capped, so any involved partners and owners are legally responsible for the full amount.
Detailed explanation-3: -Sole proprietorships do not have the protection of limited liability. Instead, the sole owner has unlimited liability. This means that the sole owner is personally liable for the debts and expenses of the business. If the business is sued, the sole owner risks losing their personal assets.
Detailed explanation-4: -The reason business owners of sole proprietorships and partnerships are subject to unlimited liability is because both business structures do not create a separate legal entity. The owners and the business are one entity.
Detailed explanation-5: -In a limited liability company or partnership, business partners are only liable for the amount of money they have put into the company. In an unlimited liability company, the owner is inextricable from the business and is personally accountable for the company’s liabilities.