Depreciation: The monetary value of an asset decreases over time due to use, wear, and tear or obsolescence. Accounting estimates the decrease in value using the information regarding the useful life of the asset. Sinking Fund Method:The sinking fund method is a technique for depreciating an asset while generating enough money to replace it at the end of its useful life. As depreciation charges are incurred to reflect the asset's falling value, a matching amount of cash is invested. These funds sit in a sinking fund account and generate interest. The sinking fund method is a depreciation technique used to finance the replacement of an asset at the end of its useful life. As depreciation is incurred, a matching amount of cash is invested, usually in government-backed securities. Calculating Depreciation under Sinking Fund method:Cost of Machinery 30000(-) Scrap Value 10000Depreciation on the plant for its whole life20000Reference to sinking fund table = 0. 180975The amount to be charged to the Profit and Loss account = 20,000* 0. 180975 = 3619. 5Therefore, Depreciation incurred = Rs. 3619. 5Given: Machinery costs Rs. 30,000. Scrap value Rs. 10,000. Life 5 years. Rate of interest 5%. Reference to sinking fund table 0. 180975. The depreciation per year will be Rs. 3619. 50