Definition
Other Income, sometimes referred to as Other Revenue, is an accounting term used on the profit and loss statement to represent income generated from activities that are not part of a company’s main business operations. This type of income includes various sources such as interest, dividends, gains from asset disposals, foreign exchange gains, and other miscellaneous revenues.
Examples
- Interest on Customers’ Notes: Income earned from interest on notes receivable.
- Dividends and Interest from Investments: Revenue from dividends on shares owned and interest from bonds and other investments.
- Profit from Disposal of Assets: Gains realized from selling non-inventory assets such as equipment, buildings, or land.
- Gain on Foreign Exchange: Financial gains due to favorable fluctuations in foreign currency exchange rates.
- Miscellaneous Concession Income: Revenue from small, irregular income sources that do not fit into standard business operations.
Frequently Asked Questions (FAQs)
What is the difference between core and other income?
Core income comes from primary business activities, such as sales revenue for a retailer. Other income is generated from secondary activities, like interest or investment income.
Can other income be negative?
Yes, other income can be negative if there are losses from non-operational activities, such as losses from foreign exchange fluctuations or asset disposals.
Is other income taxed the same way as operational income?
Yes, other income is generally subject to the same tax rates as operational income, but the specifics can vary based on local tax laws and the nature of the income.
How should other income be reported?
Other income should be reported separately from operational income on the profit and loss statement to maintain clarity in financial reporting.
Why is other income important?
Other income can provide significant insights into a company’s overall financial health and its potential profitability from diverse revenue streams.
Related Terms
- Revenue: The total income generated from the sale of goods and services.
- Net Income: The total profit of a company after subtracting all expenses, including operational and other expenses.
- Profit and Loss Statement: A financial statement summarizing revenues, costs, and expenses during a specific period.
- Dividends: Payments made by a corporation to its shareholders, usually derived from profits.
- Foreign Exchange Gain: Profit made from changes in exchange rates when dealing with foreign currencies.
Online References
Suggested Books for Further Studies
- Financial Accounting: Tools for Business Decision Making by Paul D. Kimmel, Jerry J. Weygandt, and Donald E. Kieso
- Intermediate Accounting by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
- Advanced Accounting by Debra C. Jeter and Paul K. Chaney
- Principles of Accounting by Belverd E. Needles, Marian Powers, and Susan V. Crosson
- Accounting Made Simple: Accounting Explained in 100 Pages or Less by Mike Piper
Fundamentals of Other Income: Accounting Basics Quiz
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