My Merchant Account Blog

Reserve

Saturday, July 23, 2011

The money set aside from a merchant's credit card receipts to cover potential chargebacks or other disputes. Typically, the amount is returned after a specified period. Also known as a hold back. Also known as: hold back . In asset-based lending, the difference between the value of the collateral and the amount lent. Also, funds set aside for emergencies or other future needs. In an auction, the minimum amount a seller is willing to sell at, known to the auction house but not the bidders. From the point of view of financial statements, reserves are provided as an estimate of liabilities that have a good probability of arising, such as bad debt reserve attempts to estimate what percentage of the firm's creditors will not pay (based on previous records and practical experience). Reserves are always a subjective estimate (since they reflect contingent liabilities).

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