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An accounting entry that properly reflects contingent liabilities.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.


Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
(If a bank permitted more than six such withdrawals, the MMDA was reservable as a transaction deposit.) The Monetary Control Act specified three categories of deposits subject to reserve requirements: net transaction deposits, savings deposits (personal and nonpersonal), and time deposits (with a minimum maturity of seven days).
Picnicking, swimming, reservable shelter, restrooms, two-lane boat ramp, trail.
Requiring banks to hold non-interest-earning reserves at the Fed in proportion to the volume of reservable accounts at those banks is equivalent, in terms of the economic consequences, to taxing the banks for allowing their customers to maintain such deposits.
E-Bound institutions are assumed to change the amount of base money they demand (relative to reservable deposits) approximately dollar-for-dollar following a change in statutory required reserve ratios.
Eighty-eight RV and tent camping sites; picnic areas (reservable and unreservable), game areas, play structures, unsupervised swimming area, concession stand, marina, boat ramp.
increase in the total reservable liabilities of all depository
An increase in bank reserves will still lead to an increase in reservable bank liabilities in these circumstances, but these additional funds must be put in assets that do not carry a capital requirement, such as government securities.
If booking through an agent, please note that certain journeys are reservable eg Glasgow to Aberdeen.
Current policy would thereby insulate interest rates from any shift in consumers' preferences from reservable bank deposits, for example, to nonreservable balances at on-line payment providers.
By November of 1993, that margin was reduced to approximately 103 basis points.(1) Changes in intrabank opportunity costs that lead to flows from non-reservable to reservable deposits will increase the demand for high-powered money and thereby lead to monetary tightening, even [TABULAR DATA OMITTED] though the level of reported M2 (or M2+) may not change.