Which of the following is NOT correct about "Sinking Fund"?

The correct answer is Option (4) → It is a long-term fund which can be closed at any time.

A sinking fund is a fund built up by depositing a fixed sum at regular intervals, so that a known amount is available at a fixed future date to meet a particular liability, such as replacing a machine or repaying a debt. Each option is checked as a statement:

Option (1) It is set up for particular upcoming expense. — Correct. A true statement: the fund is created for a known future expense.

Option (2) A fixed amount at regular intervals is deposited in it. — Correct. A true statement: the deposits form an annuity.

Option (3) It can be used only for the purpose it was created. — Correct. A true statement: the money is set aside for that one liability.

Option (4) It is a long-term fund which can be closed at any time. — Incorrect. The fund runs for the fixed period needed to reach the required amount and is kept until the liability falls due; it is not closed at will. This is the statement that is NOT correct.