Capital Reserve

AAA

DEFINITION of 'Capital Reserve'

A type of account on a municipality's or company's balance sheet that is reserved for long-term capital investment projects or any other large and anticipated expense(s) that will be incurred in the future. This type of reserve fund is set aside to ensure that the company or municipality has adequate funding to at least partially finance the project.

INVESTOPEDIA EXPLAINS 'Capital Reserve'

Contributions to the capital reserve account can be made from government subsidies, donated funds, or can be set aside from the firm's or municipality's regular revenue-generating operations. Once recorded on the reporting entity's balance sheet, these funds are only to be spent on the capital expenditure projects for which they were initially intended, excluding any unforeseen circumstances.

RELATED TERMS
  1. Regulation Y

    Federal Reserve action regulating corporate bank holding company ...
  2. Non-Borrowed Reserves

    A measure of the reserves in the banking system. Non-borrowed ...
  3. Capital Budgeting

    The process in which a business determines whether projects such ...
  4. Capital Expenditure - CAPEX

    Funds used by a company to acquire or upgrade physical assets ...
  5. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  6. Budget

    An estimation of the revenue and expenses over a specified future ...
Related Articles
  1. Reading The Balance Sheet
    Investing Basics

    Reading The Balance Sheet

  2. Evaluating A Company's Capital Structure
    Bonds & Fixed Income

    Evaluating A Company's Capital Structure

  3. How To Evaluate A Company's Balance ...
    Investing Basics

    How To Evaluate A Company's Balance ...

  4. How Budgeting Works For Companies
    Budgeting

    How Budgeting Works For Companies

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center