Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

The Financial Statements

Financial Accounting

1. Introduction to Accounting

The Financial Statements

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Multiple Choice

Which of the following items is included in calculating operating income?

Income tax expense

Sales revenue minus cost of goods sold and operating expenses

Interest expense

Gain on sale of equipment

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Verified step by step guidance

Understand the concept of operating income: Operating income is a measure of a company's profitability from its core business operations, excluding non-operating items such as interest expense, income tax expense, and gains or losses from the sale of assets.

Identify the components included in operating income: Operating income is calculated as sales revenue minus cost of goods sold (COGS) and operating expenses. Operating expenses typically include items like salaries, rent, utilities, and depreciation related to the core business operations.

Exclude non-operating items: Items such as income tax expense, interest expense, and gains or losses on the sale of equipment are not included in operating income because they are not directly related to the company's core business operations.

Focus on the correct formula: The formula for operating income is:

Operating Income = Sales Revenue - COGS - Operating Expenses

. Ensure you understand how each component contributes to the calculation.

Apply the concept to the question: Based on the explanation, the correct answer is 'Sales revenue minus cost of goods sold and operating expenses,' as this aligns with the definition and formula for operating income.