The entry to create a general reserve is usually:
A) DR General reserve
CR Retained profits
B) DR Retained profits
CR General reserve
C) DR Profit and loss
CR General reserve
D) DR Expense
CR General reserve

Question

Quizplus · Accepted Answer

The creation of a general reserve involves transferring profits from the retained profits account to the general reserve account. The proper entry for this transfer is to debit retained profits and credit general reserve. Option B is the only choice that reflects this entry.

The Entry to Create a General Reserve Is Usually