Question

discuss the importance if income fron continuing operations and describe its components. define what constitutes discounted operations and explain how they should be treated on the income statement

Answer 1

Income from continuing operations is a net income category found on the income statement that accounts for a company's regular business activities. Income from continuing operations is also known as operating income. Continuing operations are the primary source of income for most successful businesses.

Discontinued Operation refer to parts of a company's core business or product line that have been divested or shut down and that are reported separately from continuing operations on the income statement

In financial accounting, discontinued operations refer to parts of a company's core business or product line that have been divested or shut down and that are reported separately from continuing operations on the income statement

Disclosure on Income Statements
When operations are discontinued, a company has multiple line items to report on its financial statements. Although the business component is being shut down, it still could generate a gain or loss in the current accounting period

For further reference for discontinued operations
What Are Discontinued Operations?
In financial accounting, discontinued operations refer to parts of a company’s core business or product line that have been divested or shut down and that are reported separately from continuing operations on the income statement.

Understanding Discontinued Operations
Discontinued operations are listed separately on the income statement because it's important that investors can clearly distinguish the profits and cash flows from continuing operations from those activities that have ceased. This distinction is especially useful when companies merge, as parsing out which assets are being divested or folded gives a clearer picture of how a company will make money in the future.

On a company's income statement, discontinued operations are segregated from continuing operations so that investors may see clearly what money is inflowing from current operations versus those which have ceased.
Disclosure on Income Statements
When operations are discontinued, a company has multiple line items to report on its financial statements. Although the business component is being shut down, it still could generate a gain or loss in the current accounting period.

The total gain or loss from the discontinued operations is thus reported, followed by the relevant income taxes. This tax is often a future tax benefit because discontinued operations often incur losses. To determine the company's total net income (NI), the gain or loss from discontinued operations is aggregated with that of continuing operations.

So as not to confuse adjustments to the financial statements that relate to previously reported discontinued operations, a company may classify the adjustments separately in the discontinued operations section of its financials. Adjustments may occur because of benefit plan obligations, contingent liabilities, or contingent contract terms.

If the buyer of a discontinued operation assumes the debt associated with the operation, any interest expense before the sale is allocated to discontinued operations. Generally accepted accounting principles (GAAP) do not allow general corporate overhead to be allocated to discontinued operations.