What is other income and expense?

Definition

Other income and expense is the group of gains, losses, and side items that sit below operating income on the Income Statement. On the books, these are period results that did not come from the shop's main work.

A neighborhood print shop treats a check from the insurer for a damaged printer this way. Selling prints is the main work; the reimbursement is not.

These items still change the period's leftover. They sit in their own block so a reader can see the core leftover first.

Accrual books record the item when it is earned or incurred. Cash-basis books may wait until the cash arrives or leaves.

This block is the period's side items. It is not print sales, and it is not the keep-the-doors-open costs of the shop.

Where it shows up

P&L: Located below operating income, above net income.

Balance Sheet: Related to cash or the asset that produced the item.

Cash flow: Increases when the cash is collected, reported cash from operating activities increases.

See also: Interest Expense · Operating Income · Net Income

When you look at your Income Statement, this block sits under the operating-income subtotal. Print revenue and the costs of running the shop sit above that subtotal.

When the figure is a credit, a side item added to the leftover. When it is a debit, a side item reduced the leftover.

The Balance Sheet does not keep this period's side items after the close. The cash or the assets that produced them sit there instead.

On the Statement of Cash Flows, the cash that arrived or left is the event that matters. A collected reimbursement raises cash from operating activities.

Operating expenses are the keep-the-doors-open costs of the shop. Those stay above this block; a one-time insurance check does not join them.

Interest on a loan and a gain from selling a press sit in this same below-the-line area. They are not from selling prints.

How it works

The shop finishes the month's print jobs and running costs first. That walk produces operating income.

Anything that is not from that main work is then recorded below. A reimbursement, a small interest credit, or a loss on retiring a machine can land here.

The books debit cash, a receivable, or a loss account, and credit the matching income or gain. The pair keeps the ledger in balance.

Stay with "not from the main work" when you read the block. A rush of flyer jobs is revenue, even if it was unusual; an insurer's check for a smashed printer is this block.

Do not treat a large cash deposit as this line by itself. Cash can rise from collecting last month's invoices while this block is empty.

A shop that sells an old press records the difference between proceeds and book value here. The press itself leaves through asset disposal; only the leftover difference is this kind of item.

Insurance expense is the period's coverage cost and sits in operating expenses. A later reimbursement for a damaged machine is a separate event and belongs below.

After the month closes, these items are part of the period's leftover. Next month starts the count again from zero.

Example

Press Lane Print is a neighborhood shop. A delivery cart clips a desktop printer, and the insurer sends a $400 check that is not payment for a print job.

The shop records:

Debit: Cash $400

Credit: Other income $400

Cash (an asset) rises by $400, and this below-the-line item rises by $400. Print sales for the month do not change.

Flyer and card revenue this month is $18,000. Operating income is unchanged by the $400; the leftover after interest and tax is $400 higher.

If the same check had been recorded as print revenue, the shop would look busier than it was. The jobs did not grow; a damaged machine was reimbursed.

A later month with no reimbursement shows nothing on this line. The block is only for items that actually happened.

Common mix-ups

Other income is not the same as revenue. Revenue is from the shop's main work; this block is for items that sit below that work.

Other income is not the same as operating income. Operating income is leftover from prints and shop costs; this block is added or subtracted after that leftover.

Other income is not the same as cash. A reimbursement that has been earned but not yet collected can sit here before the check arrives.

Related terms

• Interest Expense: The cost of borrowing recorded for the period.
• Interest Income: Earnings on cash balances and short-term deposits.
• Gain On Sale Of Assets: The profit or loss recorded when an asset sells for more or less than book value.
• Operating Income: Profit from core operations before interest and taxes.
• Net Income: What is left from revenue after every expense, including interest and taxes, is subtracted.
• Income Statement: A statement showing revenue earned and expenses incurred over a period, ending in net income.
• Non-Cash Expenses: Charges that reduce profit without moving cash.
• Asset Disposal: Removing an asset and its accumulated depreciation from the books when it is sold or retired.