Multiple Choice
In the context of accounting, institutional advertisements are best classified as:
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1. Introduction to Accounting
Types of Accounting
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Interest is considered ________ income.
A
capital
B
operating
C
deferred
D
non-operating
Verified step by step guidance1
Understand the concept of non-operating income: Non-operating income refers to revenue or gains that are not related to the primary operations of a business. Examples include interest income, dividend income, and gains from the sale of assets.
Analyze the nature of interest income: Interest income is earned from investments or loans provided to other entities, which is not part of the core business activities for most companies.
Differentiate between operating and non-operating income: Operating income is generated from the primary business activities, such as sales revenue for a retail company. Non-operating income, on the other hand, comes from secondary activities like interest earned on investments.
Recognize why interest income is classified as non-operating: Since earning interest is not part of the core operations for most businesses, it is categorized as non-operating income in financial statements.
Apply this understanding to the problem: Based on the explanation above, interest income is correctly classified as non-operating income.
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