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Sinking fund method is a method of depreciation if a large sum of money is required for replacement of an asset at the end of its effective life it may not be advisable to leave in the amount of depreciation set apart annually, for it may or may not be available in the form of the readily realisable assets to the concern at the time it is required. To safegaurd this position the amount annually provided for depreciation may be placed to the credit of the sinking fund account
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What is the purpose of a sinking fund?
A sinking fund has a very important purpose. The purpose of a sinking fund is to reduce the amount of debt by repaying or purchasing outstanding loan amounts.
What is sinking fund approach?
A sinking fund approach is a type of economic approach that involves setting aside some profits over time. This money is often set aside to fund large capital expenses.
In a Sinking Fund cash or cash assets are set aside for what purpose?
A bond sinking fund is a restricted asset of a corporation that was required to set aside money for redeeming or buying back some of its bonds payable.
How would Sinking fund cash would be classified on the balance sheet?
marketable securities
Whai is difference between sinking fund and amortization of assets?
Sinking fund is the setting aside of money for instance by the government to a pool to reduce its budget deficit while amortization is the paying off of debts over a period of time with a decreasing principal balances and interests Read more in related link.
A problem and solution by using sinking fund method of depriciation?
example of sinking fund
Sinking fund method for depreciation?
Sinking fund method for depreciation The straight line method has equal annual depreciation for every year. There are other methods which has more depreciation allocated to the earlier years like Written-Down Value (WDV) method in which depreciation is charged at fixed rate (%) on the reducing balance (i.e. cost less depreciation) every year. The sinking fund method allocates more depreciation to the later years. The depreciation for the first year equals the annual deposit needed for a sinking fund to accumulate at the given rate to an amount that equals the depreciation base. For each consecutive year, the annual depreciation equals the annual sinking fund deposit plus the interest earned on the fund up to that year.
Why is there a need for a corrective sinking fund method of valuation?
You need a sinking fund when your sludge pools are filling up and you will not be able to operate your sewage disposal when they are filled without hiring 70 trucks to haul the waste away. Pay 70,000 today or accrue a liability and sinking fund on 7,000 per year for 10 years.
What is the purpose of a sinking fund?
A sinking fund has a very important purpose. The purpose of a sinking fund is to reduce the amount of debt by repaying or purchasing outstanding loan amounts.
What is the Difference between the future value of annuity and sinking fund?
future value of an annuity is a reciprocal of a sinking fund
What is sinking fund approach?
A sinking fund approach is a type of economic approach that involves setting aside some profits over time. This money is often set aside to fund large capital expenses.
Where does bond sinking fund go on balance sheet?
A bond sinking fund is reported in the section of the balance sheet immediately after the current assets. The bond sinking fund is part of the long-term asset section that usually has the heading "Investments." The bond sinking fund is a long-term (noncurrent) asset even if the fund contains only cash. The reason is the cash in the fund must be used to retire bonds, which are long-term liabilities. In other words, because the money in the bond sinking fund cannot be used to pay current liabilities, it must be reported outside of the working capital section of the balance sheet. (Working capital is current assets minus current liabilities.)
In a Sinking Fund cash or cash assets are set aside for what purpose?
A bond sinking fund is a restricted asset of a corporation that was required to set aside money for redeeming or buying back some of its bonds payable.
Does sinking fund makes money grow by adding interest to previous interest earned?
A sinking fund makes money grow over time by adding interest to previous interest earned. ... The rate of return matters when it comes to compound interest.
What is the definition of a pension fund?
The definition of a pension fund is a fund started by an employer to help and to regulate the investment of employees retirement funds given to by the employer and the employees.
How would Sinking fund cash would be classified on the balance sheet?
marketable securities
Is a sinking fund what makes money grow over time?
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