Interest expense on a mortgage would be classified on a multistep income statement under the heading
other revenue and expenses.
“Operating Expenses”.
However, it’s important to note that interest expense on a mortgage can also be classified as a “Non-Operating Expense” depending on the nature of the business and the specifics of the mortgage. Non-operating expenses are those that do not arise from a company’s core business operations and are not directly related to generating revenue.
In any case, on a multi-step income statement, operating expenses are listed separately from non-operating expenses, enabling analysts to better understand the profitability of a company’s core business operations. The multi-step income statement typically includes three sections:
1. Revenue or Sales Section
2. Cost of Goods Sold Section
3. Operating Expenses Section
The operating expenses section includes all expenses incurred in the day-to-day operations of the business, including rent, salaries and wages, utilities, and interest expense on mortgages. By separating out operating expenses, analysts can better evaluate a company’s ability to generate profits from its core business operations.
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