Question

The distinction between operating and nonoperating income relates to: (1) continuity of income. (2) primary activities of the reporting entity. (3) consistency of income stream. (4) reliability of measurements.

Answer 1

The reason why there is a difference between operating and nonoperating income is (2) primary activities of the reporting entity.

What is nonoperating income?

This is income that a company gets from activities that the company does not engage in primarily. For instance, a manufacturing company getting income from investments in a tech firm.

Operating income on the other hand, is income that is acquired from the primary activities of the company in question.

In conclusion, option 2 is correct.

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