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.

Answer: (D)

Verified step by step guidance

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.