Bond Sinking Fund

When a company or governmental unit borrows money that needs to be paid back in several years, they may put a part of what they owe in the bank every year so that when the debt comes due they will have the money.

Let’s a city borrowed $100,000 to be paid back in 10 years. Every year they put $10,000 in the bank. After 10 years they had $100,000 in the bank to pay back the debt. The money growing in the bank, just waiting for repayment day is called a sinking fund.

https://accounting.uworld.com/cpa-review/lc/accounting-dictionary/term/bond-sinking-fund/