A sinking fund is typically listed as a noncurrent asset—or long-term asset—on a company's balance sheet and is often included in the listing for long-term investments or other investments. Companies that are capital intensive usually issue long-term bonds to fund purchases of new plant and equipment.
What are examples of sinking funds?
15 sinking fund categories you likely need in your budget
- Christmas gifts. I've used this example many times so far because it's truly a quintessential sinking fund category. ...
- Car-related expenses. ...
- Homeownership-related expenses. ...
- Medical expenses. ...
- Self-employed taxes. ...
- Wedding. ...
- Vacations. ...
- Dining out.
Is a sinking fund a savings account?
A sinking fund is a sum of money that you set aside (usually by saving a bit each month) that's completely separate from your savings account or your emergency fund. A sinking fund can be used to pay for home repairs, save for a new car, pay for your vacation, or cover large medical bills.
