Which of the Following Statements Is CORRECT

question 21

Multiple Choice

Which of the following statements is CORRECT?

• A) In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business.
• B) Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests.
• C) A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company.
• D) In a limited partnership, the limited partners have voting control, while the general partner has operating control over the business. Also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy.
• E) A major disadvantage of all partnerships relative to all corporations is the fact that income taxes must be paid by the partners rather than by the firm itself.

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Definitions:

International Accounting Standards

A set of accounting standards developed and overseen by the International Accounting Standards Board (IASB), aiming to promote global consistency in financial reporting.

Conceptual Framework

The conceptual framework in accounting is a system of interrelated objectives and fundamentals that provides the foundation for financial accounting and reporting standards.

General Purpose Financial Statements

Financial reports intended to meet the needs of various users who are not in a position to demand custom reports tailored to their information needs.

Special Purpose Financial Statements

Financial statements designed to meet specific needs of users that are not addressed by standard financial statements, often required by contractual or regulatory requirements.