All of the Following Are Advantages of a Sole Proprietorship

question 70

Multiple Choice

All of the following are advantages of a sole proprietorship except ________.

• A) creating one is easy and inexpensive
• B) unlimited liability
• C) it is not subject to double taxation
• D) the owner maintains complete control of the business
• E) business losses can be deducted against the sole proprietor's other sources of income

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Definitions:

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated by adding new purchases to the starting inventory and subtracting goods sold.

Inventory Valuation Methods

Techniques used to calculate the cost of goods sold and ending inventory, such as FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and average cost methods.

Gross Profit Method

An accounting technique used to estimate the amount of ending inventory and cost of goods sold, based on the gross profit margin.

Gross Profit Ratio

A financial metric that indicates the proportion of money left over from revenues after deducting the cost of goods sold.