Define a compensating balance reported in the financial statements?A compensating balance is a minimum amount of money that a borrower agrees to keep on deposit in a bank account as a condition for obtaining a loan or line of credit, serving as a form of collateral or assurance for the lender. This balance is usually not available for use by the borrower during the loan period and may be classified as restricted cash on the balance sheet if it is legally required and significant.For example, if a company borrows $$500,000$ and the bank requires a $$50,000$ compensating balance to be maintained in a separate account, that $$50,000$ cannot be used for regular operations and may be reported as a non$-$current asset depending on the loan's terms. Another example is when a bank requires a business with a line of credit to always keep $10\%$ of the borrowed funds in an account; this amount becomes the compensating balance and is either recorded as restricted cash or disclosed in the financial notes, depending on materiality and legal enforceability.