Question

Any profit or loss on the sale of sinking (depreciation) fund investment is transferred to:

• A. Profit and loss account
• B. Asset account
• C. Sinking fund account (depreciation fund account)
• D. Depreciation A/c

Answer 1

Answer: (C)

Sinking fund account (depreciation fund account)

Option C is the correct one.

Under this method, the amount of depreciation charged every year is transferred to the sinking fund account. Also, the sale proceeds of the old asset and any profit or loss from the sale of investments are transferred to the Sinking Fund Account.this amount also invested in govt.securities.