Which of the Following Is True About Sole Proprietorship

question 5

Multiple Choice

Which of the following is true about sole proprietorship?

• A) It is the most difficult kind of business form to set up.
• B) It is not considered as a legal entity separate from its owner.
• C) It does not incur unlimited liability on its owner.
• D) It is not supported by any unique tax advantages.

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Definitions:

Perpetual Inventory System

An inventory management method where records of inventory quantities are updated in real-time after every transaction.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts.

Merchandising Company

A business that purchases finished goods for resale, making a profit on the difference between the buying and selling prices.

Service Company

A business that provides intangible products (services) to consumers, as opposed to selling physical goods.