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 ?
I address myself, therefore, first to the benevolence of your majesty, that I may know what has become of my friends, reserving to myself, if necessary, the right of appealing hereafter to your justice.
He cautioned the latter to advance slowly, reserving the strength and speed of the horses until within a moderate distance of the herds.
So he stayed out his apprenticeship, and committed no act of dishonesty that was at all likely to be discovered, reserving his plan of emigration for a future opportunity.
There was a fearful dismay in this suggestion of my excited imagination, and if I had allowed myself time to dwell upon it, I should no doubt have cut there and then, rushed back to my chamber, and bolted myself in; but whenever a danger or a horror is veiled with uncertainty, the primary wish of the mind is to ascertain first the naked truth, reserving the expedient of flight for the moment when its dread anticipation shall be realized.
We disposed them thickly all around, reserving only a slight opening that barely permitted us to crawl under the shelter we had thus obtained.