Definition of Extraordinary item, Prior period item

Definition of Extraordinary item, Prior period item: 

 Extra ordinary items are such income & expense which are not received regularly in the business.
Its nature is differently from ordinary activities. It is not expected to reoccur frequently.
It is an abnormal item for the organisation.
This type of income & expense are not business income & exp.

 Some Extraordinary items are as follows :-

•  Govt. grant receivable as compensation of Expense
•  Attachment of Property.
•  Sale of fixed assets (like building. machine , Tractor, Furniture etc).
•  Loss due to earthquake.
• Treatment of Extra ordinary item ;

Treatment of  Extraordinary Items  ;

 This type of items amount & nature should be shown separately in profit & loss a/c. Because the impact of such item on profit &loss A/c can be seen seperately.  Separate disclosure is useful for user of financial statement.



Prior period item  : 
 Prior period items are income & exp which occur in current period.
  occurring current period due to error & omission in prior period.
  This item not related to current  financial year. but treatment can be done   in current financial year.

Treatment of Prior period item :-

       Prior period item amount & nature should be shown separately in Financial statement.
       Then its clear impact can be seen in the Profit & Loss A/C.

Example Of Prior period items :- 

•  Applying in incorrect rate of depreciation.
•  Treatment of Operation lease As Finance lease.
•  Non provision of salary due in earlier year.
•  capitalisation of borrowing cost.

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