Multiple Choice
Which of the following best describes a temporary activity a company undertakes to create a unique product, service, or result?
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1. Introduction to Accounting
Types of Accounting
Multiple Choice
Generally, which of the following does NOT correctly categorize the type of income in accounting?
A
Interest earned on investments is classified as non-operating income.
B
Revenue from sales is classified as operating income.
C
Dividends received are classified as non-operating income.
D
Gains from the sale of fixed assets are classified as operating income.
Verified step by step guidance1
Step 1: Understand the concept of income categorization in accounting. Income is generally classified into operating income and non-operating income. Operating income arises from the primary business activities, while non-operating income comes from secondary or incidental activities.
Step 2: Review the examples provided in the problem. Interest earned on investments and dividends received are typically classified as non-operating income because they are not directly related to the core business operations.
Step 3: Recognize that revenue from sales is classified as operating income because it is directly related to the primary business activities of selling goods or services.
Step 4: Analyze the statement about gains from the sale of fixed assets. Gains from the sale of fixed assets are generally classified as non-operating income because they result from incidental activities, not the core business operations.
Step 5: Conclude that the statement 'Gains from the sale of fixed assets are classified as operating income' does NOT correctly categorize the type of income in accounting, as it misclassifies non-operating income as operating income.
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