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CSEET · Fundamentals of Accounting · Introduction to Company Accounts

Which statement best describes a feature of company accounts as distinct from the accounts of a sole proprietor?

A company is a separate legal entity, so its books show its own assets, liabilities and capital distinct from those of its members. Accounts are kept continuously, not in a shareholder's name and not only on winding up.

  1. AThe company's accounts are kept in the personal name of its principal shareholder
  2. BThe company is a separate legal entity, so its accounts record its own assets, liabilities and capital apart from those of its membersCorrect
  3. CCompany accounts need not be maintained once the shares are fully paid
  4. DThe accounts of a company are prepared only when it is wound up

Explanation

A company is a separate legal entity from its members, so its books record its own assets, liabilities and capital. Keeping accounts in a shareholder's name confuses the company with its members. Accounts are maintained throughout the life of the company, not only on winding up or until shares are paid.

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