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Business Definition for: replacement reserve
replacement reserve

an amount set aside from Net Operating Income to pay for the eventual wearing out of short-lived assets .

Example:Singer buys new apartments, each containing $3,000 worth of carpeting and appliances that have a 10-year useful life . Each year she deposits $300 in a replacement reserve account to pay for recarpeting and new appliances in 10 years.

See also reserve fund
replacement reserve

amount set aside from net operating income to pay for the eventual wearing out of short-lived assets; sometimes used by a homeowners'association .

See also reserve fund
Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.

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