CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

Which one of the following is an example of "other expenses and losses" in a multiple income statement?

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
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