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Accounting Standard 24 ( AS 24 ) - Discontinuing Operations

>> October 15, 2009

When, I have read this accounting standard, I find this accounting standard more interesting than other accounting standards. Because, ICAI gives some guidelines to auditors who check the financial statements of company.

1. To see the net profit or loss of discontinuing operations upto the date of dispose off, is mentioned in financial statement.

2 . To check the effect of discontinuing operation on financial statement especially in balance sheet.

Before going to deepness of AS 24 we just discuss simple meaning of discontinuing operations and its accounting treatment under AS 24.

Meaning of discontinuing operations

A company starts many operations in same time and finds that one or some of these operations are not profitable, so company can stop to do activities in these operations. All these operation which is stopped by company is called discontinuing operations. But one more important thing is to know:

Before closing any operation company has already purchased some asset and taken some loan for operating such operation, so proper accounting for this necessary. In accounting treatment of discontinuing operation, company should sell its all assets and paid its all liabilities and balance amount should add in capital or reserve of company.

If time period to dispose off of discontinuing operation is more than one year then calculate its net annual profit or loss and show it in financial statement like other active operation.

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