Sinking fund: In this article

In this article, we will explore what a sinking fund is, its purpose in India, whether it is considered an asset or a liability, why it is called a sinking fund, and how to calculate it using a formula and examples. What is Sinking Fund? A sinking fund is a designated financial reserve established by a corporation, government, or person with the specific objective of gradually accumulating cash over some time in order to repay a debt or fulfill an upcoming financial obligation. A sinking fund is a dedicated account where money is reserved to repay debts or bonds. It facilitates debt repayment at maturity or allows bonds to be repurchased in the market. Callable bonds with sinking funds may be redeemed early, eliminating future interest obligations for investors. What Is The Sinking Fund Formula? A sinking fund refers to a fund that is set aside by an economic entity over a period of time to take care of the planned expenses or the debt obligations.