Question

What is the basis for distinguishing between operating and non-operating items?

Short answer

Operating items report only the principal operations, and non-operating items reports secondary activities of the company.

Step-by-step solution

Meaning of Operating Activities

Operating activities mean theregular activities involving the production and selling of the product, including all the general and administrative expenses.

Explanation of differences between operating and non-operating items

Operating items include all the primary operations such as sales or revenue, cost of goods sold, selling expenses, and general expenses. Non operating items report revenues and expenses only from secondary activities like all the other revenue and gains and other expenses and losses, which are not related to the production directly.