What is sinking fund? And how should be it is treated?
3 Replies
Ashish Jain
(.Net Developer)
(641 Points)
Replied 02 June 2011
A fund or account into which a person or company deposits money on a regular basis in order to repay some debt or other liability that will come due in the future. For example, if one has a loan with a balloon maturity of seven years, one may put money into a sinking fund for seven years in order to be ready to pay off the principal when it comes due. Some bonds have sinking fund provisions, requiring the issuer to put money aside to repay bondholders at maturity.
Jagdish
(Article)
(123 Points)
Replied 02 June 2011
thanks sir,
further i want to know that interest on such principle is not paid from sinking fund or otherwise?
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