The Most That the Owner of a Sole Proprietorship Can

question 183

True/False

The most that the owner of a sole proprietorship can lose,as a result of business debts or lawsuits,is the amount he/she has invested in the business.

---

Definitions:

Aging of Accounts Receivable Method

An accounting technique used to estimate the amount of receivables that are unlikely to be collected, based on the length of time they have been outstanding.

Percentage of Sales Method

A forecasting technique used to predict various financial figures, such as expenses or inventory levels, as a fixed percentage of sales.

Allowance for Doubtful Accounts

A contra asset account representing the amount of accounts receivable a company does not expect to collect.

Equity

Equity represents the value that would be returned to a company’s shareholders if all the assets were liquidated and all the debts repaid.