28 November 2009
Sinking fund is a fund created to replace an asset or redeem a liability.it is created through p/l a/c (dep cr to a/c for replacement of assets) or p/l appropriation (amt trf. from appropriation a/c to sinking fund a/c). the amt. is invested in outside securities. sinking fund bal. increases with intt. on investment n profit on sale of invt. and d same decreases if there is loss on sale of invt. when the funds are required for replacement or redemption, the investments are sold out. the method is followed just to make liquid funds available whenever required. Regards, CA Shakuntala Chhangani
CAclubindia
