DIFFERENCE BETWEEN SINKING FUND METHOD AND INSURANCE POLICY METHOD :
| Sinking Fund Method | Insurance Policy Method |
| (i) Interest is an integral part of sinking fund method | (i) Interest is not considered under insurance policy method |
| (ii) Investment in securities is the basic feature of sinking fund method | (ii) The money is not invested in any outside securities under insurance policy method.Only an insurance policy is taken for the required amount to replace the asset at the end of the useful life of the asset. |
| (iii) Under sinking fund method, investments are made at the end of the accounting period. | (iii) Premium is paid in advance at the beginning of the year under insurance policy method. |
| (iv) Under sinking fund method, the amount realised is affected by fluctuations in interest rate and value of securities. | (iv) But, under insurance policy method, the amount realised at the end of the life of the asset is fixed. |