Managers may engage in classification shifting by reporting operating expenses as non operating expenses to inflate reported operating income.
Explanation:
The expenses that are not related to the principle activities of a business is treated as non-operating expense
A non-operating expense is an expense incurred from activities unrelated to core operations.
Non-operating expenses are deducted from operating profits and accounted for at the bottom of a company's income statement.
Examples of non-operating expenses include interest payments,dividends and capital gains or losses
The main difference between a Operating and Non-operating expense is Operating expenses refers to all the costs an individual incur to bring a product or service to market whereas a Non-operating expenses refers to the costs that are not related to normal business operations, such a paying the interest.
