The fund created to accumulate money over the years to discharge a future obligation is known as:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Sinking Fund
A sinking fund is built up by setting aside fixed amounts at regular intervals, with interest, so that a known future obligation (repaying a loan or bond, replacing a machine) can be met when it falls due.
A perpetuity is a series of payments that goes on for ever, an emergency fund is kept for unforeseen needs, and equity is the ownership share in a company; none of these is created for a known future obligation.
CBSE Applied Mathematics (Class XII):
Sinking Fund
