Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Issue and Redemption of Debentures

Question:
A Sinking Fund is a part of which of the following?
Options:
Reserves and surplus
Assets
Liabilities
None of the above
Correct Answer:
Reserves and surplus
Explanation:
A sinking fund is an account containing money set aside to pay off a debt or bond. Sinking funds may help pay off the debt at maturity or assist in buying back bonds on the open market. Callable bonds with sinking funds may be called back early removing future interest payments from the investor.