When paying for higher education, scholarships and grants can be considered:

• A. sources of non-taxable income
• B. deferred revenues
• C. long-term liabilities
• D. accounts payable

Answer: (A)

Verified step by step guidance

1. Understand the nature of scholarships and grants: Scholarships and grants are financial aid provided to students to help cover the cost of education. They are typically awarded based on merit, need, or other criteria and do not require repayment.
2. Analyze the term 'non-taxable income': Non-taxable income refers to money received that is not subject to income tax. Scholarships and grants often fall into this category if they are used for qualified education expenses such as tuition, fees, and required course materials.
3. Evaluate the other options: Deferred revenues refer to income received in advance for services or goods yet to be provided, which does not apply to scholarships or grants. Long-term liabilities are obligations due over a period longer than one year, and accounts payable are short-term liabilities owed to creditors, neither of which describe scholarships or grants.
4. Determine the correct classification: Since scholarships and grants are financial aid that does not require repayment and are often non-taxable when used for qualified education expenses, they are best classified as sources of non-taxable income.
5. Conclude the reasoning: Based on the analysis, scholarships and grants are considered sources of non-taxable income when used appropriately for educational purposes.