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A company creates a general reserve out of profits. What is the most appropriate financial statement presentation and effect?

AShow as a current liability; decreases total equity

BShow within equity as an appropriation of retained earnings; total equity unchanged

CShow as a non-current asset; increases total assets

DShow as a reduction of revenue; decreases net income

Answer:

B. Show within equity as an appropriation of retained earnings; total equity unchanged

Read Explanation:

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