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I'm reading the income statement of a company, and the column describing profit is titled Profit from operations before non-trading and capital items. So, my question is a two-parter:

  1. What is a non-trading item?
  2. What is a capital item?

1 Answer 1

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The Profit from operation is what the company makes during a normal course of year and is a good indicator of how good [or bad] its performing.

The non-trading items are one-off expense or earning that are not periodic in nature; for example payoff on a litigation.

The Capital item is a long term expense incurred [say purchase of new machinary / equipement] that would be amortized over a period of time and cannot be treated as expense in one particular year. It can also be items like sale of a property reulting in profits.

Such items at times hide the actual profitability of the company and hence as an accounting practise they are always listed seperately.

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