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Which of the following most likely represents a permanent or recurring component of income? a)...

Question:

Which of the following most likely represents a permanent or recurring component of income?

a) Gain from selling PP&E

b) Rent income

c) Change in accounting principles

d) Gain from an investment

Recurring Items

The term recurring item is used for those events and transactions which occurs on a daily basis or are occurred frequently in the business. On the other side comes the non-recurring items which are of temporary nature and those transactions are not repeated very frequently. Some of the non-recurring nature transactions are the transaction of merger or acquisition, change in accounting principles, change in depreciation estimates, etc.

Answer and Explanation:


The correct answer is option b) Rent Income

Explanation

a) Gain from sale of property, plant and equipment is not a recurring item such transactions take place only when assets are sold.

b) Rent is a recurring item, it is recorded every month, quarterly or annually when ever the income is earned

c) The change in accounting principles is a rare event, only when a better idea is presented, it is also a non-recurring item

d) Gain from investment is not a recurring item such transactions take place only when any investment is sold.

So, the correct answer is option b)


Learn more about this topic:

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Operations of an Income Statement

from Accounting 101: Financial Accounting

Chapter 8 / Lesson 5
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