Cookie jar reserves are savings from previous quarters that a company records as earnings in subsequent quarters to make it appear that its earnings were higher than they really were. When a company fails to meet its earnings target, a company accountant can dip into the cookie jar to inflate the numbers.Needless to say, the practice of cookie jar accounting is frowned on by government regulators as it misleads investors on the company's performance.Wall Street values companies that consistently meet or beat their earnings targets quarter after quarter. Analysts rate them highly and investors pay a premium for their stock shares.They tend to be valued more highly than companies that have the potential to earn spectacular amounts of money in some quarters but fail in others.Cookie jar accounting can be used to smooth out volatility in financial results and give a false impression of stability.

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