Question

Following is an extraordinary item :

• A. Salary paid
• B. Tax paid
• C. Rent paid
• D. Loss due to theft

Hint:

To identify an extraordinary item, ask two questions: Is it unusual in nature? Is it infrequent in occurrence? Examples include losses from natural disasters (earthquakes) or expropriation of assets.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
In financial accounting, items of income or expense are categorized to give a clear picture of operational performance. Extraordinary items are those that are highly abnormal and not related to the ordinary, day-to-day operations of the business.

Step 2: Detailed Explanation:
- Salary paid, Tax paid, and Rent paid: These are standard operating expenses incurred regularly to keep the business running. They are part of ordinary activities.
- Loss due to theft: This is a rare, unforeseen, and non-recurring event. It does not stem from the normal operating activities of the enterprise. Therefore, it is classified as an extraordinary item so that it doesn't distort the analysis of the firm's regular operating performance.

Step 3: Final Answer:
Loss due to theft is an extraordinary item.