In order to be classified as an extraordinary item in the income statement, an event or transaction should be
A) unusual in nature, infrequent, and material in amount.
B) unusual in nature and infrequent, but it need not be material.
C) infrequent and material in amount, but it need not be unusual in nature.
D) unusual in nature and material, but it need not be infrequent.

Question

Quizplus · Accepted Answer

According to Generally Accepted Accounting Principles (GAAP), in order to be classified as an extraordinary item in the income statement, an event or transaction should be unusual in nature, infrequent, and material in amount. Therefore, option A is the correct choice. Option B is incorrect because even though the event or transaction might be unusual and infrequent, it still needs to be material to be classified as an extraordinary item. Options C and D are incorrect because they do not include all three requirements of being classified as an extraordinary item (either unusual in nature, infrequent, or material in amount is missing).

In Order to Be Classified as an Extraordinary Item in the Income