Line Item In Accounting – Definition
The concept of line items is not specifically defined or explained by any accounting standard because it is more of a general terminology used by accountants. Generally, a line item is defined as an item appearing on a single line in a series of information. However, it has a much more specific definition in accounting.
Line item in accounting can be defined as items of the financial statements that fall under the same group, ie income and expenses. These line items are arranged and grouped together to make the financial statements look neat and understandable.
For example, if a company incurs different minor expenses that are related to a particular group, it would be better to list all of the expenses under the same group to avoid confusion. Thus, the concept of line items is used to make the items of the financial statements in line with their respective group items.
Line Item: Example
- Expenses that relate to the same group, ie office stationery, and paperwork costs can be grouped together under the heading “admin costs”. Hence, the stationary, paperwork, and other related costs are referred to as line items.
Costs are of different types and it is important to write related costs together for the financial statements to make sense for the users. Writing hundreds of different costs on the face of financial statements that otherwise could be written under a single heading creates confusion and affect the neatness of financial statements. Therefore, it is important to line the costs together.
