Interest is considered ________ income.

• A. capital
• B. operating
• C. deferred
• D. non-operating

Answer: (D)

Verified step by step guidance

1. 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.
2. 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.
3. 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.
4. 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.
5. Apply this understanding to the problem: Based on the explanation above, interest income is correctly classified as non-operating income.