Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 11 - Reporting and Analyzing Stockholders' Equity - Questions: 1

Answer

1. Separate Legal Assistance: A corporation is a separate entity from its owners. It acts in its own name and has no link with the name of its owners. 2. Limited Liability of stockholders :- The liability of stock holders is limited to their investments in the corporation. 3. Transferable ownership rights :- Common stock in a corporation is transferable and can be transferred to other person.

Work Step by Step

1. A corporation may purchase the assets (land, building) or borrow funds in its own name. In other words, it can be said that the corporation can act like any other human being, except that it cannot be seen or touched. 2. As the corporation is a separate legal entity, its creditors can recover their dues from the corporation only, and cannot make the owners personally liable for it. 3. Stockholder may transfer his interest partly or fully, by selling their stock. It does not require approval of the corporation or from the other stockholders.
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