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O-LevelAccountingThe fundamentals of accounting7707/12 · May/June 2024 · Q201 Mark

'Unlimited liability' is one of the disadvantages of operating as a sole trader. What is the correct explanation of unlimited liability?

Asole trader cannot take a bank loan.
Bsole trader has to manage their business alone.
Csole trader cannot use their private funds to repay business loans.
Dsole trader may lose both their business and personal funds.

✓ Correct answer

D: sole trader may lose both their business and personal funds.

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About this question

Topic
The fundamentals of accounting, O-Level Accounting (syllabus 7707). Multiple choice, 1 mark.
Source
O-Level Accounting, May/June 2024 Paper 1 Variant 2, question 20.

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