A specific amount is deposited in an account to save it for multiple purposes of the company in the future. This account is called Sinking Fund and it is used for reasons like replace a unproductive asset or repay a debt or buy back a bond. It is similar to the savings bank account that people use to deposit money and can be used for a set purpose.
Sinking funds, with regard to a company or business, works as a savings account for specific set purpose merely with an intention of keeping the company in a position to meet emergency expenditure.
The concept of sinking fund is also used and implemented in personal cases, where individuals plan to keep aside a specific amount periodically to meet unexpected medical expenses.
There is also something called the Emergency Funds or Contingency Funds which is similar to sinking funds except that in this case, the organisation has the liberty to use to cover a varied range of different contingencies. This list of unexpected and unconventional emergencies might also be something that were not anticipated initially during the beginning of the fund life.