reserve account

Thân thiện

A company sets aside money in a reserve account for future equipment upgrades.

Definition

Noun: A reserve account is a sum of money that a company or organization sets aside from its profits to cover expected future costs, losses, or obligations. It is a portion of earnings not distributed as dividends but retained to strengthen the financial position.

Usage

This term is used primarily in accounting, finance, and business contexts to describe a specific type of financial planning. It refers to the deliberate allocation of profits to a separate holding to meet future, anticipated needs.

Examples

• The company's board voted to transfer $2 million to a reserve account for equipment upgrades next year.
• A prudent financial strategy includes maintaining a reserve account for potential economic downturns.
• The annual report showed an increase in the reserve account, indicating stronger financial safeguards.

Advanced Usage

• Creating/Establishing a Reserve Account: The act of formally setting up this fund.
  • The new policy involved establishing a legal reserve account for environmental remediation.
• Drawing on/Tapping into a Reserve Account: Using the funds from this account for their intended purpose.
  • During the crisis, the city had to draw on its reserve account to maintain essential services.

Variants and Related Words

• Reserve (noun): A more general term for something kept back or set aside for future use. A reserve account is a specific type of reserve.
• Allowance for Doubtful Accounts: A specific type of reserve account estimating uncollectible customer debts.
• Contingency Reserve: A reserve account specifically for unexpected events.
• Capital Reserve: A reserve account created from capital profits (like revaluation surplus) rather than revenue profits.

Synonyms

• Provision
• Allowance (in specific accounting contexts, e.g., allowance for depreciation)
• Retained earnings (broader term; a reserve account is a component of retained earnings)

Antonyms

• Distributed earnings
• Dividends paid

Related Phrases

• To appropriate to reserve: The formal accounting action of allocating profits to a reserve account.
  • The profits were appropriated to reserve rather than being paid out to shareholders.
• Reserve Fund: Often used interchangeably with "reserve account," particularly when the reserved money is highly liquid and readily available.

Học thuật

Noun

1. funds taken out of earnings to provide for anticipated future payments

Từ đồng nghĩa

• reserve fund