Merits:
- it makes provision for the replacement of the asset at the end of its working life.
- It is an acceptable method if a minimum rate of interest cannot be earned on current funds.
Demerits:
the Sinking Fund Method places an equal burden on the profit and loss account in earlier years, i.E., Depreciation remains fixed throughout the life of an asset.
- The method tends to lower the apparent profits in earlier years and increase them in later years.