Managerial Accounting for IE

1. Starting a sole proprietorship is much less complicated than starting a formal corporation, and also much cheaper.

(1 Point)

a. ease of formation

b. decision making

c. provides employment

2. Control over all business decisions remains in the hands of the owner.

(1 Point)

a. ease of formation

b. decision making

c. provides employment

3. Sole proprietors are legally responsible for all debts against the business.

(1 Point)

a. unlimited liability

b. difficulty in raising funds

c. lack of continuity

4. The business does not continue if the owner becomes deceased or incapacitated, since they are treated as one and the same.

(1 Point)

a. unlimited liability

b. difficulty in raising funds

c. lack of continuity

5. Sole proprietorship often has limited capital which was provided by the owner from personal savings or consumer loans.

(1 Point)

a. unlimited liability

b. difficulty in raising funds

c. lack of continuity

6. The following are major characteristics of a Partnership, choose the incorrect one.

(1 Point)

a. based on contract

b. co-ownership of partnership property

c. assignment of partners interest

d. association of individuals

e. unlimited liability

f. mutual agency

g. ease of formation

h. limited life

i. all answers are correct

7. A characteristic of partnership refers to alliance of at least two persons, having reciprocal rights and obligations towards each other.

(1 Point)

Option 1

Option 2

Option 3

d. co-ownership

8. The relation of partners arises from an agreement whether in oral form or in writing.

(1 Point)

a. association of individuals

b. based on contract

c. mutual agency

d. co-ownership

9. Every partner is assumed as an agent of the partnership for the purposes of the business.

(1 Point)

a. association of individuals

b. based on contract

c. mutual agency

d. co-ownership

10. Assets invested by any of the partners become the property of the partners because they are common owners of the partnership.

(1 Point)

a. association of individuals

b. based on contract

c. mutual agency

d. co-ownership

11. Under the separate entity concept for accounting, a business is viewed as existing separately from other personal interest of the owners. Legally however, a partnership is not considered a separate entity from the partners when it involves debts to third party creditors.

(1 Point)

a. ease of formation

b. limited life

c. unlimited liability

d. income participation

12. The partnership business must be carried on with the object of sharing profits among the partners.

(1 Point)

a. ease of formation

b. limited life

c. unlimited liability

d. income participation

13. Partnership is perfected by the mere consent of the parties.

(1 Point)

a. ease of formation

b. limited life

c. unlimited liability

d. income participation