Which of the following is correct about the Sinking Fund?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → It is set-up for a particular upcoming expense.
A sinking fund is created to meet a specific future obligation.
It is not meant to be closed any time, it is not for emergencies and deposits are usually regular.
The correct statement is: It is set-up for a particular upcoming expense.