Which of the following statements is correct for an entity that has discontinued part of its operations during the financial year?
A) The entity must show the profit or loss from the discontinued operation separately to the profit or loss from continued operations.
B) The entity must include the profit or loss from the discontinued operation as part of continued operations.
C) The entity must not show the profit or loss from the discontinued operation on the financial statements for the year.
D) The entity must show only the profit or loss from the discontinued operation on the financial statements for the year.

Question

Quizplus · Accepted Answer

According to accounting standards, when an entity discontinues part of its operations during the financial year, it must show the profit or loss from the discontinued operation separately to the profit or loss from continued operations. This is required to give a clear picture to the users of financial statements about the financial impact of the discontinuation of the operation. Therefore, option A is the correct statement. The entity cannot include the profit or loss from the discontinued operation as part of continued operations, nor can it show only the profit or loss from the discontinued operation on the financial statements for the year.

Which of the Following Statements Is Correct for an Entity