Reserve (accounting)

A reserve in accounting is like a piggy bank that a business keeps to make sure it has enough money for unexpected things that might happen in the future.

For example, let's say a business has to pay for repairs to its building unexpectedly. If the business did not have a reserve, it might not have enough money to pay for the repairs and could get into financial trouble.

So, the business sets aside some money as a reserve. It's like putting some money in a piggy bank every month, so that when something unexpected happens, the business has enough money saved up to pay for it without having to borrow money or cut back on other things.

Just like a piggy bank, the reserve money is not meant to be spent on regular expenses. It is only used when something unexpected happens, like if the business has to pay for a big repair or if there is a natural disaster that affects the business.