Guidance and Knowledge for Value Investors
An extraordinary event in business refers to an economic transaction that is not a function of regular business activity. It must be significant in value and infrequent in occurrence.
The final type of estimating relates to unusual and infrequent items. These are commonly referred to as extraordinary items. Basically, they rarely occur but do happen once or twice over an economic cycle.
No other business term is so misunderstood, misstated, misleading or deceiving as the words ‘net profit’. Accounting defines net profit as the amount earned after all associated costs and expenses are subtracted from the associated sales. The larger or more public the company the more reliable the dollar value as stated on the bottom line. But in small business, the more likely the value is inaccurate as stated in the financial report.
In accounting sometimes an extraordinary event occurs. When this happens the associated revenue and expense is recorded in the expense type of accounts. There are two different methods used to record this transaction – gross or net.