ACCOUTING PRIN SET LL INCLUSIVE
ACCOUTING PRIN SET LL INCLUSIVE
14th Edition
ISBN: 9781119815327
Author: Weygandt
Publisher: WILEY
Question
Book Icon
Chapter 13, Problem 1Q
To determine

Corporation: A business entity which is liable for the actions and finances of the business, it is owned by shareholders but controlled by board of directors which are officially elected by shareholders it can be for a profit purpose or can be charitable

To explain: (a) Separate legal existence, (b) limited liability of stockholders and (c) transferable ownership rights.

Expert Solution & Answer
Check Mark

Explanation of Solution

  • Separate legal existence: A business which is detached from another business in terms of reporting. It comes into existence to separate the actions of business from other company.
  • Limited liability of stockholders: Stockholders liability remains limited to the amount of their capital invested in business regardless of losses suffer by the business.
  • Transferable ownership rights: Shares are owned by the shareholders they can sell them wholly are partially depending on their will, however the things changed in partnership firm as it required a common understanding of all or both the partners.

Notes:

  • Under separate legal existence, a business is separated from another business (of which it was a part of) in terms of accountability. It creates its own business identity and can enter into contracts with that.
  • Limited liability stockholders state that shareholders ownership is only limited to the amount they invested in business. Under this, creditors cannot claim the company’s assets.
  • Shareholders holding shares in a company, give them right to sell them without anybody’s interference while this is only the case in individual business entity in case of partnership firm they can only be sold or purchased only after a mutual consent.
Conclusion

The above given characteristics have different but an important existence in partnership and individual business types.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education