sinking fund

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sinking fund,

sum set apart periodically from the income of a government or a business and allowed to accumulate in order ultimately to pay off a debt. A preferred investment for a sinking fund is the purchase of the government's or firm's bonds that are to be paid off. Usually the fund is administered by a trustee. See amortizationamortization
, reduction, liquidation, or satisfaction of a debt. The term amortization may also refer to the sum used for that purpose. The term is commonly used in ascertaining the investment value of securities.
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sinking fund

[′siŋk·iŋ ‚fənd]
(industrial engineering)
A fund established by periodically depositing funds at compound interest in order to accumulate a given sum at a given future time for some specific purpose.