Question

Under sinking fund method of depreciation any deficit in sinking fund A/c is transferred to ____________.

• A. Capital Reserve A/c
• B. General Reserve A/c
• C. Reserve Capital A/c
• D. Profit and loss A/c

Answer 1

The correct option is D Profit and loss A/c

Any surplus in Sinking fund account may be transferred to general reserve account. If any deficit, that may be transferred to profit and loss account. The journal entry for this transaction is:

For Profit:

Sinking fund A/c ------Dr.

To General reserve A/c

For Deficit:

Profit and loss A/c----- Dr.

To Sinking fund A/c