Which of the Following Areas Have a Major Difference in Accounting

question 8

Multiple Choice

Which of the following areas have a major difference in accounting treatment by sole traders and partnerships and accounting treatment by companies?
I. Accounting for GST
II. Accounting for equity
III. Distributions to owners
IV. Accumulation of profits
V. Accounting for inventory
VI. Accounting for income tax

• A) I, IV and V
• B) I, II and III
• C) II, III, IV and VI
• D) III, V and VI

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Definitions:

Product Warranty

A promise or guarantee given to a customer that a product is free from defects and will perform as specified for a certain period of time.

Company Tax Rate

The percentage of its profits an organization is required to pay to the government as tax.

Tax Deductible

Expenses that can be subtracted from gross income to reduce the taxable income.

Warranty Liability

An obligation reported on a company's balance sheet that represents the estimated costs of fulfilling the terms of warranties offered on products sold.