reserve

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Reserve

An accounting entry that properly reflects contingent liabilities.

Allowance for Doubtful Accounts

Extra funds from sales, or another source, set aside in order to pay off bad debt if and when it arises. The allowance helps a company ward off any potential cash flow problems should its credit sales not be repaid as expected. On financial statements, it is important to note that an allowance for bad debts exists for fiscal conservatism and not because one expects a large amount of bad debt to accumulate. An allowance for doubtful accounts is also called a cushion. Banks call these funds the loan loss reserve. See also: Savings account.

Reserves

reserve

The funds that are earmarked by a firm from its retained earnings for future use, such as for the payment of likely-to-be-incurred bad debts. The existence of such a reserve informs readers of the firm's financial statements that at least a part of the retained earnings will not be available to the stockholders. See also allowance for doubtful accounts, reserve for contingencies.
References in classic literature ?
She unbraided her two pigtails, combed out the waves of her hair and tied them back with a ribbon, changed her shoes, and then slipped on the pretty frock, managing to fasten all but the three middle buttons, which she reserved for Emma Jane.
John Knightley was a tall, gentlemanlike, and very clever man; rising in his profession, domestic, and respectable in his private character; but with reserved manners which prevented his being generally pleasing; and capable of being sometimes out of humour.
But they would have been improved by some share of his frankness and warmth; and her visit was long enough to detract something from their first admiration, by shewing that, though perfectly well-bred, she was reserved, cold, and had nothing to say for herself beyond the most common-place inquiry or remark.
Mary's countenance was equally intelligent--her features equally pretty; but her expression was more reserved, and her manners, though gentle, more distant.