Reserve definition

A reserve is a pool of funds or assets that a company, bank, or government sets aside instead of spending it now. It is held to meet future obligations or to absorb losses the organisation has not planned for.

Reserves can take the form of cash, liquid assets, retained earnings, or an accounting entry against future costs. A company may hold reserves for repairs, legal claims, or a downturn; a bank holds them to meet withdrawals and regulatory rules; a central bank holds foreign exchange reserves to support its currency.

A reserve is not the same as a provision. A reserve sets aside part of a company's profit or equity as a general cushion, with no specific bill attached. A provision is a recognised liability for a cost the company already expects, such as a known legal payout, so it is tied to a particular obligation.