The effect on the balance sheet of an accounting entry making a transfer from the retained earnings account to a general reserve account is:
A)a decrease the total shareholders' equity of the company.
B)there is no change to total shareholders' equity.
C)an increase in the total shareholders' equity of the company.
D)a decrease in the total shareholders' equity and a decrease in assets

Question

Quizplus · Accepted Answer

Transferring from retained earnings to a general reserve does not affect the total amount of shareholders' equity. The transfer is simply moving funds from one account to another within equity, so the overall equity balance remains the same.

The Effect on the Balance Sheet of an Accounting Entry