SINKING FUND METHOD
Sinking fund method is a technique where an asset is depreciated in the bookkeeping records. Simultaneously, the sinking fund method yields money to buy asset replacements once the asset reaches the end of its useful life. Basically, the business sets aside a lump sum of money to be annually invested. This results is the generation of money because of the principal and the interest earned by the fund. These are used to buy assets for replacement.
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