Wellcome!

 

 

Asked/Added Questions From NCERT:


Question 1. Asked on :08 August 2021:03:17:43 AM

Accounting Entries for Creation of Sinking Fund?


-Added by Master Purushottam Accountancy » Issue & Redemption Of Debentures

Answer:

Master Purushottam

 

  • A sinking fund is a fund created for the repayment of a liability or for the replacement of an asset.
  • For collecting funds, a sinking fund is created voluntarily by making a charge against distributable profits. Every year, an equal amount is debited to Profit and Loss Appropriation Account and credited to Sinking Fund Account.

Accounting Entries for Creation of Sinking Fund:


At the end of 1st Year

(a)  For annual contribution (determined with the help of Sinking Fund Table) 

Profit and Loss Appropriation Account                       Dr.

To Sinking Fund Account

(b)  For investing the amount set aside

Sinking Fund Investment Account                               Dr.

To Bank Account

At the end of the 2nd and subsequent years

(a)  For receiving interest on sinking fund investment

Bank Account                                                                Dr.

To Interest on Sinking Fund Investment Account

(b)  For transferring interest on sinking fund investment to sinking fund account 

Interest on Sinking Fund Investment Account          Dr.

To Sinking Fund Account

Alternatively,

Bank Account                                                              Dr.

To Sinking Fund Account

(c)  For annual contribution

Profit and Loss Appropriation Account                      Dr.

To Sinking Fund Account

(d)  For investing the amount set aside plus interest received during the year

Sinking Fund Investment Account                              Dr. 

(Contribution plus Interest) 

To Bank Account

At the end of the year of redemption

(a)  For receiving interest on sinking fund investment

Bank Account                                                              Dr.

To Interest on Sinking Fund Investment Account

(b)  For transferring interest on sinking fund investment to sinking fund account 

Interest on Sinking Fund Investment Account         Dr.

To Sinking Fund Account

(c)  For annual contribution

Profit and Loss Appropriation Account                      Dr.

To Sinking Fund Account

At the end of the year of redemption of debenture, annual contribution and interest of that year are not invested outside. On that date all the investments are sold.

(d)  For realization of sinking fund investments

Bank Account                                                              Dr.

To Sinking Fund Investment Account

(e)  For profit on sale investment

Sinking Fund Investment Account                             Dr.

To Sinking Fund Account

(f)  For loss on sale of investment

Sinking Fund account                                                 Dr.

To Sinking Fund Investment Account

(g)  For redemption of debentures at a premium

Debenture Account                                                     Dr.

Premium on Redemption of Debenture Account       Dr.

To Debenture holders Account

(h)  For payment to debenture holders

Debenture holders Account                                       Dr.

To Bank Account

(i)   For transferring premium on redemption of debentures 

Sinking Fund Account                                                Dr.

To Premium on Redemption of Debentures Account

Note: Reverse entry will be made in case of a redemption at a discount

(j)   For transferring part of the sinking fund no longer required Sinking Fund Account                                                             Dr.

To General Reserve Account

-Answered by Master Purushottam On 08 August 2021:03:20:30 AM(21451Average Rating Based on rating)

 

You can see here all the solutions of this question by various user for NCERT Solutions. We hope this try will help you in your study and performance.

This Solution may be usefull for your practice and CBSE Exams or All label exams of secondory examination. These solutions or answers are user based solution which may be or not may be by expert but you have to use this at your own understanding of your syllabus.

 

 

What do you have in your Mind....

Ask Your Question? From your text book.

Our Expert Team reply with answer soon.

 

Ask Your Question

 

* Now You can earn points on every asked question and Answer by you. This points make you a valuable user on this forum. This facility is only available for registered user and educators.

Next moment you answer is ready .... go ahead ...

 

 

 

Search your Question Or Keywords

 

 

Do you have a question to ask?

 

Ask Your Question

User Earned Point: Select

 

 

 

All Tags by Subjects:

 

Science (2231)
History (278)
Geography (310)
Economics (257)
Political Science (96)
Mathematics (200)
General Knowledge (5686)
Biology (94)
Physical Education (20)
Chemistry (118)
Civics (114)
Home Science (12)
Sociology (9)
Hindi (45)
English (258)
Physics (1435)
Other (97)
Accountancy (378)
Business Study (71)
Computer Science (128)
1 (2)

 

 

Sponsers link