Reserve Account
Profit and Loss Account
Capital Account
Surplus Account
Answer is Right!
Answer is Wrong!
The correct answer is A. Reserve Account.
A sinking fund is a fund that is set aside to pay off a debt. The amount is transferred every year from the reserve account. The reserve account is a type of account that is used to hold money for a specific purpose. In this case, the purpose is to pay off the debt. The money in the reserve account is invested in safe investments, such as government bonds. The interest earned on the investments is used to pay off the debt.
The other options are incorrect because they are not types of accounts that are used to hold money for a specific purpose.
- Option B, Profit and Loss Account, is a type of account that is used to record the income and expenses of a business.
- Option C, Capital Account, is a type of account that is used to record the owner’s equity in a business.
- Option D, Surplus Account, is a type of account that is used to record the excess of income over expenses.