Which of the Following Is FALSE

question 74

Multiple Choice

Which of the following is FALSE?

• A)A sole proprietor is exclusively responsible for performing all contracts entered into in connection with the business.
• B)Sole proprietors must include any income or loss from the sole proprietorship business in their income for income tax purposes.
• C)A sole proprietor is vicariously liable for torts of employees in the course of the sole proprietorship business.
• D)A sole proprietor cannot be an employee of the sole proprietorship business.
• E)A sole proprietorship is a cautious method of forming of business as the proprietor has no legal liability for tort of contract and the proprietorship business is a separate legal entity from the proprietor.

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Definitions:

Owner's Capital

The amount of equity a business owner has invested in their firm or the net assets belonging to the owner.

Income Summary

An account used in the closing process that summarizes the revenues and expenses for a specified accounting period, facilitating the transfer of the net income or loss to owner's equity.

Withdrawals Account

A Withdrawals Account tracks the money or assets taken out of a business by its owner(s) for personal use, affecting the owner's equity balance.

Owner's Capital

The amount of equity belonging to the owner of a business, reflecting investments and accumulated earnings.