Sole Proprietorships Resolve the Issue of Agency Problems Primarily By

question 69

Multiple Choice

Sole proprietorships resolve the issue of agency problems primarily by:

• A) avoiding excessive expense accounts.
• B) discharging those who violate the rules.
• C) allowing owners to share the cost of their actions with others.
• D) forcing owners to bear the full cost of their actions.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that reduces the total accounts receivable on the balance sheet to reflect the amount that is expected to go uncollected.

Credit Sales

Sales in which the customer is allowed to pay at a later date, typically used to increase business by offering clients flexible payment terms.

Unadjusted Balance

The initial balance of an account before any adjustments for interest, payments, or discrepancies have been made.

Accounts Receivable Assigned

Refers to the process where a company uses its accounts receivable as collateral for a loan, effectively assigning the rights to collect those receivables to the lender.