Capital Reserves

In finance, the term capital account is used to define a type of account on the balance sheet of a company or municipality that is particularly reserved for capital investment projects that are on a long term basis or any expenses anticipated in the future. The main purpose of such an account is to set aside adequate funds for at least partial financing of a project. Generally, the contributions to this type of reserve are made by government subsidiaries, donated funds or even by the regular revenue generating operations conducted by the municipality or the firm. Once the funds are recorded on the balance sheet of the reporting entity, they can be spent only on the capital expenditure projects initially intended for. In fact, companies of any size can create a capital reserve that can be utilized for ongoing projects as well as means for reserving funds for future works.

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Edited and Updated 31st May 2014

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