Key Difference Between Operating And Non-Operating Income Explained With Examples

 Introduction

Operating income refers to the revenue generated from company's core business activities such as selling products, commissions, service charges etc. On the other hand, non-operating income is a revenue generated from non-core business activities such as gains from selling of assets, dividend received, rental income etc. 

Difference Between Operating Income And Non-operating Income

The main dissimilarities of differences between operating and non-operating income can be described as follows:

1. Meaning

Operating Income : It refers to the amount of income a firm generates from its daily core-business activities within a specific period of time.

Non-operating Income: It refers to the amount of money a company generates outside of a core-business activities.

2. Source

Operating Income : The main source of operating income is core business activities such as sales, commission charge etc.

Non-operating Income: It is generated from incidental activities such as selling of assets, investment profit etc.

3. Frequency

Operating Income: It occurs regularly

Non-operating Income: It is occasional

4. Predictability

Operating Income: It is more predictable than non-operating income

Non-operating Income: It is less predictable than operating income because it occurs occasionally

5. Reflect

Operating income: It shows the operational efficiency of the business

Non-operating income: It shows ancillary activities

6. Impact On Profitability

Operating income: It has high impact on the profitability of the business

Non-operating income: It doesn't have significant impact on profitability

7. Examples

Operating income: Income generated from selling of products or services, commission, rental income, royalties are some examples of operating income

Non-operating income: Interest and dividend income, earnings from sales of assets or properties, lawsuit settlements etc. are the examples of non-operating income

Operating Income Vs Non-Operating Income (Comparison Table)

Basis	Operating Income	Non-Operating Income
Frequency	Regular	Occasional
Source	Sales, commission etc.	Selling of assets, interest etc,
Predictability	Yes	No
Reflect	Operational efficiency	Occasional financial activities
Impact On Profitability	High impact	Less impact

Distinction Between Operating Income And Non-operating Income In Brief

* Operating income is generated from day-to-day business activities but non-operating income includes earnings from outside core business activities

* Operating income is regular and predictable but non-operating income of occasional and not predictable

* Operating income reflects business efficiency but non-operating income does not related to operational efficiency of the business

* Operating income helps the management for long-term financial planning, On the other hand non-operating income does not play any role in financial planning,