Other income definition
/What is Other Income?
Other income is income derived from activities unrelated to the main focus of a business. The exact type of transaction characterized as other income will vary by business. It is important to classify these types of income separately on a reporting entity’s income statement, to prevent readers from thinking that this income is part of its core earnings. By stating it separately, you can more easily discern how well the core operations of a business are functioning.
Examples of Other Income
Here are several examples of other income:
Rental income. A manufacturer of washing machines earns rental income from sub-leasing unused office space to a third party; this rental income would be classified as other income on the company’s income statement.
Interest income. A distribution business earns a small amount of interest income on its excess cash reserves.
Gain on the sale of assets. A manufacturer sells one of its production machines for somewhat more than its residual book value, resulting in a small gain.
Gain from foreign exchange transactions. A business incidentally generates a gain when it exchanges its foreign currency holdings into its home currency.