Sinking Fund Method

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Dictionary Says

Definition of 'Sinking Fund Method'

A technique for depreciating an asset in bookkeeping records while also generating money to purchase a replacement for the asset when it reaches the end of its useful life. Under the sinking fund method, the business sets aside an amount of money to invest annually so that the principal plus the interest earned in the fund will be enough to replace the asset.
Investopedia Says

Investopedia explains 'Sinking Fund Method'

The amount of money that needs to be added to the asset-replacement fund each year is calculated by determining  how much it will cost to replace the asset, how many years the asset is expected to last and what rate of interest can be earned as well as how much can be earned through the effects of compound interest. The sinking fund method is not common, and is not desirable when interest rates cannot reasonably be predicted.
Search results for

'Sinking Fund Method'

  • 3 Ways To Value Real Estate Investments

    http://www.investopedia.com/articles/mortgages-real-estate/12/value-real-estate-investments.asp
    ... of-investment method is that it is the most appropriate capitalization rate for
    financed real estate investments. The first step is to calculate a sinking fund ...

  • CFA Level 1 Study Guide - Assets - Depreciation | Investopedia

    http://www.investopedia.com/exam-guide/cfa-level-1/assets/depreciation.asp
    ... Statement; 6.20 Cash Flow Statement Basics; 6.21 Cash Flow Computations - Indirect
    Method; 6.22 Cash Flow Computations - Direct Method; ...

  • CFA Level 1 Study Guide - Fixed Income Investments - Refunding ...

    http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/refunding.asp
    ... Statement; 6.20 Cash Flow Statement Basics; 6.21 Cash Flow Computations - Indirect
    Method; 6.22 Cash Flow Computations - Direct Method; ...

  • CFA Level 1 Study Guide - Fixed Income Investments - Provisions ...

    http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/bond-redemption-provisions.asp
    ... Statement; 6.20 Cash Flow Statement Basics; 6.21 Cash Flow Computations - Indirect
    Method; 6.22 Cash Flow Computations - Direct Method; ...

  • Financial Statements: Long-Lived Assets | Investopedia

    http://www.investopedia.com/university/financialstatements/financialstatements7.asp
    ... Reported profits are directly impacted by the depreciation method. ... because it serves
    a valuable purpose: it sets aside an annual amount (a sinking fund, if you ...

  • CFA Level 1 Study Guide - Financial Statements - Balance Sheet ...

    http://www.investopedia.com/exam-guide/cfa-level-1/financial-statements/balance-sheet-components-assets.asp
    ... Statement; 6.20 Cash Flow Statement Basics; 6.21 Cash Flow Computations - Indirect
    Method; 6.22 Cash Flow Computations - Direct Method; ...

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