Which statement BEST describes the classification of investment income in the proprietary fund statement of revenues?

In the context of proprietary funds, investment income can indeed be classified in a couple of ways, but the most common practice is to classify it as nonoperating revenue. This is primarily because proprietary funds are meant to operate like private businesses, and their operating revenues stem from the primary business activities or services they provide. Investment income does not directly relate to these core services; therefore, it typically falls under the category of nonoperating revenues.

However, there are circumstances where investment income could be considered operating revenue, particularly if the investment activities are directly tied to the fund’s primary operations or if the investments are a significant part of the fund’s activities. Thus, it is accurate to say that both classifications are possible (hence the inclusion of either option); however, the norm is to classify investment income as nonoperating revenue. This reflects common accounting practices aimed at providing clarity regarding the source of revenues in financial statements, making choice C the most appropriate answer.