What is the classification of profit on disposal in the statement of profit or loss?

Profit on disposal in the statement of profit or loss is classified as income because it represents the gain that a business realizes from selling an asset above its carrying amount. When an asset is sold, the proceeds from the sale are compared to the asset's book value. If the proceeds exceed this value, the difference is recognized as profit, which contributes positively to the overall profit for the period. This classification reflects the inflow of economic benefits that enhances the entity's net worth.

In financial statements, income such as profit on disposal plays a crucial role, as it not only provides insight into a company's performance but also affects retained earnings and shareholders' equity. Understanding this classification helps stakeholders assess how well the business is performing, particularly in terms of managing its assets effectively and generating returns from its investments.