Explore BrainMass

Explore BrainMass

    Financial accounts are often loosely referred as reserves...

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The use of the term reserve in the title of a financial statement account is not acceptable in the United States, primarily because its purpose is often too vague. However, informal use of the term by chief financial officers, analysts, and the media is common when they are discussing various aspects of acceptable accrual accounting techniques employed by U.S. firms. Provide several examples of financial statement accounts that are often loosely referred to as reserves. What is typically common about all financial statement accounts that are informally referred to as reserves?

    © BrainMass Inc. brainmass.com October 10, 2019, 4:31 am ad1c9bdddf

    Solution Preview

    All account informally referred to as "reserves" are set up based on estimates. This means that the amounts will not be known for sure until future periods. For example, the allowance for uncollectible accounts. This is an account to reduce accounts receivable down to the net realizable value, the amount that will ultimately be collected in cash. The estimate must be made when the sale occurs, which is ...

    Solution Summary

    Your discussion is 275 words (about a page) and is in everyday language suitable for a novice. Examples are given (uncollectible accounts, warranty reserves, clean up reserves).