- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 2. Analyzing Income Statements
- Subject 6. Income Statement Ratios and Common-Size Analysis
CFA Practice Question
Which one of the following is an example of "other expenses and losses" in a multiple income statement?
B. Interest on bonds and notes
C. Miscellaneous office expenses
D. Income taxes
A. Travel and entertainment
B. Interest on bonds and notes
C. Miscellaneous office expenses
D. Income taxes
Correct Answer: B
Special gains and losses that are infrequent or unusual, but not both, are normally reported in the non-operating section of a multistep income statement. These items generally break down into two main subsections: other revenues and gains, and other expenses and losses.
User Contributed Comments 16
| User | Comment |
|---|---|
| Naufil2004 | Why is choice C incorrect? |
| quincy | C is part of usual operating expenses |
| chenyx | Interest is "other expenses and losses" |
| haarlemmer | Intest is not other expenses and losses, however, the interest on bonds and notes is, I think. |
| danlan | Interest is other expenses, not operational |
| guna | Interest is the cost of borrowing money, hence it is an expense. This seems to be a regular interest expense. To qualify for "Other expenses and losses", I don't see an exception. |
| cfahanoi | Operating expenese does not include Interest expenses -> Other expenses includes interest expenses |
| bobert | The income statement is really broken down into operating and non-operating. Interest expense is not an operating expense because it does not have to do with the main business activity. (unless you are a bank I suppose) But regardless, it is the statement of cash flows that gets broken up more with operating, financing, and investing activities. As far as the income statement goes though, it is either op or nonop. As far as why C is incorrect, you would need office supplies to run your business just as much as you need labor. How can you send an invoice by mail without paper? how can you manufacture your product without labor? Both of these examples demonstrate why they are operating expenses. Interest expense on bonds and notes however have nothing to do with operating a business. You do not NEED to have debt issued to run a business. It may help, but it is not part of the operations. |
| mdleOlga | Very good explanation by bobert! Thank you! |
| tiamiyu | Thank you bobert |
| TheHTrader | So I suppose travel and entertainment are operating expenses? |
| boddunah | how do you consider travel and entertainment as operating expenses? to close deals with clients executives take clients on golf trip .would it be a reason why travel and entertainemnt is considered operating expense? |
| santoo | Great explanation! |
| Neuman | Income statement broken into: 1) operating 2) non-operating |
| johntan1979 | For the noobs who have never worked in their life, yes, travel and entertainment is part of op ex. |
| pranubal | Very good explanation Bobert |