What Is the Fundamental Difference Between a Sole Proprietorship and a Corporation

question 29

Multiple Choice

What is the fundamental difference between a sole proprietorship and a corporation?

• A) A corporation is larger than a sole proprietorship.
• B) A corporation is a legal entity that is separate from its owners, while in a sole proprietorship, there is no such distinction.
• C) A sole proprietor has unlimited liability, while investors in a corporation have limited liability.
• D) A corporation is more bureaucratic than a sole proprietorship.
• E) There isn't really a fundamental difference between a sole proprietorship and a corporation.

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Definitions:

Percentage-Of-Completion Method

An accounting method used to recognize revenue and expenses of long-term projects proportionally to the work completed.

Revenue Recognition

The accounting principle that outlines the specific conditions under which revenue is recognized and recorded.

Customer Billing

The process of invoicing customers for goods or services provided, detailing the amount owed and payment terms.

Installment Sales Method

An accounting technique that recognizes revenue and expenses from a sale when payments are actually received, rather than at the point of sale.