Answers to Questions
Question 1: D. You can structure the business using any one of three options. A simple partnership would not give you liability protection. If the type of business you are starting puts you at risk of lawsuits, you may want to seek liability protection using a Limited Liability Corporation (LLC) or a corporation. Check with your accountant and attorney to sort out the best structure for your business.
Question 2: C. Inventory is an asset and would be found on the balance sheet, which includes Assets, Liabilities, and Equity. The other three accounts are Income Statement accounts.
Question 3: B. Sales is an income account and would be found on the Income Statement. The other three accounts are balance sheet accounts.