Daffodil International University
Faculties and Departments => Accounting – The Language of Business => Business Administration => Business & Entrepreneurship => Financial Accounting => Topic started by: fahmidaemran on November 25, 2018, 05:13:33 PM
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Why is interest expense a non operating expense?
Interest expense is a non-operating expense when it is not part of a company's main operations. For example, a retailer's main operations are the purchasing and sale of merchandise, and a manufacturer's main operations are the production and sale of goods. Neither the retailer nor the manufacturer has as its main operations the borrowing and lending of money. (On the other hand, a bank's main operations involves interest expense on its depositors' savings accounts and interest revenues on its loans and bond investments.)
By reporting interest expense as a non-operating expense, it also allows for a better comparison between the operating income of a retailer that has little debt with a retailer that has a significant amount of debt.