Multiple choice

What is the journal entry for investment of amount of depreciation?

  1. Dr. Dep. a/c & Cr. Bank a/c

  2. Dr. Sinking fund a/c & Cr. Bank a/c

  3. Dr. Sinking fund Invest a/c & Cr. Bank a/c

  4. Dr. Bank a/c & Cr. Sinking fund Invest a/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a sinking fund is established for depreciation, the accumulated funds are regularly invested in securities to earn interest. The journal entry records this investment by debiting Sinking Fund Investment Account (receiving the asset) and crediting Bank Account (making the payment). This captures the transaction where funds move from the sinking fund into investment instruments.

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