Page 236 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes 3. When at the end of 1st year, an equivalent amount to the depreciation is invested in some
securities
Sinking Fund Investment Account Dr.

To Cash/Bank Account
4. At the end of second year when interest on the first year’s sinking fund investment is
received
Bank Account Dr.

To Sinking Fund Account
5. When depreciation on assets is charged
P&L Account Dr.
To Sinking Fund Account
6. When annual installment of depreciation along with the interest received on previous
year’s investment is invested in some securities
Sinking Fund Investment Account Dr.
To Bank Account
(For the subsequent years the same pattern is adopted.)

7. On the expiry of the economic life of the assets, if S.F. investments are sold at profit
Bank Account Dr.
To Sinking Fund Investment Account
To Sinking Fund Account (profit on sale)
If there is loss on sale of investment:

Bank Account Dr.
Sinking Fund Account Dr.
To Sinking Fund Investment A/c
8. When old assets are sold
Bank Account Dr.
To Assets Account

9. When the balance of sinking fund account is transferred to assets account
Sinking Fund Account Dr.
To Assets Account
10. The balance of assets account (if any) transferred to P& L account
P&L Account (loss) Dr
To Assets Account
Or

Assets Account Dr
To P&L Account (Profit)

230 LOVELY PROFESSIONAL UNIVERSITY