What is NON-RECURRING INCOME ?
Definition of NON-RECURRING INCOME
NON-RECURRING INCOME in general means any event that happens only once and would not repeat.
Non-recurring events are also known as extra ordinary events. They can be both income and expense cases.
Non-recurring in business means any unusual event that brought in income to the business, but would not happen again.
Brief Explanation of NON-RECURRING INCOME
- Sale and gain on an asset or investment
- Disposition of business segment
- Gain in legal case
- Insurance settlement
- Gain on early retirement of debt
- Any other one time sale
Non-recurring items or income should be reported separately on the income statement. The reason to do so is that they deviate the results drastically.
- Comparison of income or profit from one year to another is not fully understandable if non-recurring income is not mentioned separately.
- It changes the normal trend of profit hence comparison is not justifiable.
For example: If a business has decided to sell or discontinue one of it’s segments but is still under the use of business. In that case business should already keep the activities of the segment separate. This is one the main requirement of International Accounting standards IAS.