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Question & Answer: hich of the following is not included in the determination of n…..

Which of the following is not included in the determination of net income for the period?
A. An item of income that is unusual in nature and infrequent in occurrence.
B. The effect on prior periods of changes in an accounting principle.
C. A loss on the disposal of a material segment of business.
D. An item of income that is infrequent but not unusual.
Expert Answer

 

Income statement is prepared to calculate the net income earned during the period. It is determined by charging the expenses incurred from the revenues earned during the period. These items relate to the principal revenue generating activities of an enterprise. Unusual items or infrequent items are reported as an extra-ordinary item in the income statement. The effect of prior period adjustments is also reflected in the income statement. A loss on the disposal of a material segment of business is not included in the determination of net income for the period. Loss on the disposal of a material segment is not a principal revenue generating activity and thus it is not to be reported in the income statement. Thus, Option C is the correct option.

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