Loss from Discontinued Operations
Net loss of a business line or branch closed or sold during the year, shown separately on the Profit and Loss statement.
In detail
When a unit of the business is closed or sold at a loss, NFRS 5 wants its result shown on one line separate from the continuing business, so the Profit and Loss tells the reader what the surviving operations earn. This ledger receives the net loss of the discontinued unit, moved out of the ordinary income and expense ledgers at the period end by Journal Entry; a profit goes to Profit from Discontinued Operations under Other Income. Total profit does not change, only its presentation. A Cost Center for the unit, set up when it started, makes the figures easy to collect. Any loss on selling the unit's assets and the cost of staff severance are included.
Formula
Loss from Discontinued Operations = Expenses of the discontinued unit - Its income for the period, including any loss on selling it
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Loss from Discontinued Operations | Rs 1,20,000 | |
| Salaries and Wages | Rs 1,20,000 |
How to record it in BRAccount
- 01Run Financial Reports > Profit and Loss Statement filtered by the unit's Cost Center for the period.
- 02Go to Invoicing > Journal Entry > New dated the period end.
- 03Credit the unit's expense ledgers and debit its income ledgers to clear them, with the net loss debited here.
- 04Submit. The entry below posts and the line appears under Expenses.
- 05Disclose the unit's revenue, expenses and the loss in the notes as NFRS 5 requires.
When to use it
Post by Journal Entry at year end to move the closed unit's net loss out of ordinary expenses.
Example from the demo books
Dr Loss from Discontinued Operations Rs 1,20,000, Cr Salaries and Wages Rs 1,20,000 for the closed Chitwan safari desk's final-quarter loss.