Reserve
A reserve is profits that have been appropriated for a particular purpose. Reserves are sometimes set up to purchase fixed assets, pay an expected legal settlement, pay bonuses, pay off debt, pay for repairs and maintenance, and so forth. This keeps funds from being used for other purposes, such as paying dividends or buying back shares. It can signal to investors that a certain amount of cash is not to be distributed to them in the form of dividends. The board of directors is authorized to create a reserve. For example, a business wants to reserve funds for a future building construction project, credits a Building Reserve fund for $5 million, and debits retained earnings for the same amount. The building is then constructed for $4.9 million, which is accounted for as a debit to the fixed assets accounts and a cash credit. Once the building is completed, the original reserve entry is reversed, with $5 million debited to the Building Reserve fund and $5 million credited to the retained earnings account [AccountingTools].
In financial accounting, a reserve always has a credit balance. It can refer to a part of shareholders' equity, a liability for estimated claims, or a contra-asset for uncollectible accounts. A reserve can appear in any part of shareholders' equity except for contributed or basic share capital. In nonprofit accounting, an "operating reserve" is the unrestricted cash on hand available to sustain an organization. Nonprofit boards usually specify a target of maintaining several months of operating cash or a percentage of their annual income, called an Operating Reserve Ratio. Reserve is the profit achieved by a company where a certain amount of it is put back into the business, which can help the business on its rainy days [Wikipedia].
Reserve (accounting). Wikipedia. Retrieved from: https://en.wikipedia.org/wiki/Reserve_(accounting)
Reserve accounting. AccountingTools. Retrieved from: https://www.accountingtools.com/articles/what-is-reserve-accounting.html