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 Rationing

    The act of placing restrictions on the amount of new investments ...
  4. Actuarial Adjustment

    A revision made to reserves, premiums and other values based ...
  5. Capital Budgeting

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

    Funds used by a company to acquire or upgrade physical assets ...
Related Articles
  1. Investing Basics

    Reading The Balance Sheet

  2. Bonds & Fixed Income

    Evaluating A Company's Capital Structure

  3. Investing Basics

    How To Evaluate A Company's Balance ...

  4. Budgeting

    How Budgeting Works For Companies

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. 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 ...
  6. Debit Spread

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