Which option correctly identifies an operating item vs. non-operating item?

• A. Non-operating items include interest income/expense, gains or losses on disposal of assets
• B. Operating items relate to core business (sales, COGS, operating expenses)
• C. Sales revenue and COGS
• D. Interest income

Answer: (C)

Operating items come from the company’s everyday activities, while non-operating items come from activities outside those core operations. Sales revenue and COGS are the primary operating items because they arise directly from selling goods and the costs tied to producing them, and they define the core operating performance of the business. Non-operating items include things like interest income or expense and gains or losses on asset disposals, which are not part of the day-to-day running of the business. A statement that operating items relate to the core business is true, but it doesn’t name a specific operating item; the pair that lists sales revenue and COGS directly represents the operating activities.