Profit from Discontinued Operations

When a company closes or sells a distinct part of its business, such as a safari desk or a branch, NFRS 5 requires the results of that part to be shown on one separate line below the profit from continuing operations, so readers can see what the ongoing business earns. This ledger receives the net profit of the discontinued unit, moved out of the ordinary income and expense ledgers by Journal Entry at the period end; a loss goes to Loss from Discontinued Operations under Expenses. The entry does not change total profit, only its presentation. Set a Cost Center for the unit from the start so its income and expenses can be found easily when the time comes.

Profit from Discontinued Operations = Income of the discontinued unit - Its expenses for the period, including any gain on selling it

1. 01Run Financial Reports > Profit and Loss Statement filtered by the unit's Cost Center for the period.
2. 02Go to Invoicing > Journal Entry > New dated the period end.
3. 03Debit the unit's income ledgers and credit its expense ledgers to clear them, with the net profit credited here.
4. 04Submit. The entry below posts and the line appears under Other Income.
5. 05Disclose the unit's revenue, expenses and tax in the notes as NFRS 5 requires.

Post by Journal Entry at year end to move the closed unit's net result out of ordinary income.

Dr Rendering of Services Rs 2,00,000, Cr Profit from Discontinued Operations Rs 2,00,000 for the closed Chitwan safari desk's final profit.