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Concept of Depreciation Fund Method:

Under this method, an amount of depreciation is written off at the end of each year. Depreciation fund method is also known as sinking fund method. Whatever fund written off each year again reinvested in some government papers or somewhere else. The reinvested amount again added with the depreciation fund. This is a continuous process for the lifetime of the asset. It is a good way to save money for future consumption of assets.

 The Depreciation fund method also allows exempting some tax to the entrepreneur of business. It also reduces the burden of the firm regarding the shortage of fund for the new asset.

Functionality of Depreciation Fund Method

It helps in maintaining the working capital of the enterprise. For example, a company purchased a machinery worth $10000, with a life of 10 years. The company will have to replace it with a new one after the expiry of the life of the machine.  So that company provides depreciation on its assets for accumulating a sum which is equivalent to the cost of the machine.

The depreciation under this method can be calculated with the help of sinking fund table. It is calculated at a given rate of interest for a particular period of time. We at are also available to help you with the task assigned to you on depreciation fund method assignment help and depreciation fund method homework help.

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The problem faced by the students in solving depreciation fund method:

  • Many students face problem of arranging entries while solving for depreciation fund method.
  • Those students who have keen interest in depreciation fund method of accounting, also faces some difficulty in solving it. Sometimes it may happen with those students, that the problem which they solved have some error. It may be because of lack of practice. They need to practice sums for more than three times.
  • It is very easy topic which can be understood by every student, no matter whether they are weak or extraordinary student. But for all of them to learn it, they need to avoid their sin of lack of interest in every subject.

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