Which of the following is considered a type of income in financial accounting?

• A. Accounts payable
• B. Revenue from sales
• C. Prepaid expenses
• D. Interest income

Answer: (D)

Verified step by step guidance

1. Understand the concept of income in financial accounting: Income refers to the earnings generated by a business from its operations or investments. Common types of income include revenue from sales, interest income, rental income, and dividend income.
2. Analyze the options provided: Accounts payable and prepaid expenses are not types of income. Accounts payable is a liability, representing amounts owed to creditors, while prepaid expenses are assets, representing payments made in advance for goods or services.
3. Identify the correct types of income: Revenue from sales is considered operating income, as it is earned from the primary business activities of selling goods or services. Interest income is considered non-operating income, as it is earned from investments or financing activities.
4. Differentiate between operating and non-operating income: Operating income arises from the core business activities, such as sales revenue, while non-operating income arises from secondary activities, such as interest income or gains from investments.
5. Conclude that the correct answers are 'Revenue from sales' and 'Interest income,' as these are both types of income in financial accounting, while accounts payable and prepaid expenses are not.