Question 37Q

Question

How should the disposal of a component of a business be disclosed in the income statement?

Step-by-Step Solution

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Answer

Disclosure of a disposed component is based upon its nature, i.e., continued or discontinued.

1Meaning of Income Statement

An income statement is a report drafted annually by the business entities to ascertain their profit or losses from the operational and non-operational functions. An income statement contains the description of revenues and expenses.

2Disclosure of disposal of a business component

If a business concern disposes of its component, then the outcome must be disclosed in the income statement. Disposal may result in either gain or loss.

If such a component belongs to business operations, the outcome can be reported in the continuing operation section.

In comparison, if a component belongs to non-operating operations, then the company should report the gain or loss as an extraordinary item separately in the discontinued operations section.

Question 33Q

Question 1BE

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