Term line item basically refers to such piece of information which has its own weight and should be presented on a separate line on any document.
In context of International Accounting Standards (IASs) and International Financial Reporting Standards (IFRSs) line items simply means a category on the face of financial statements and in the notes to the financial statements.
In financial statement line items basically represents different incomes and expenses accumulated under one head. For example, Administration expenses is one line item, Selling expenses is separate category and must be presented in the next line or different line. Same goes for finance cost which is yet another line item. So, it simply means piece of information pertaining to a particular category reported in separate line.
Here is the short format of income statement in which each heading or category is a line item as it has been reported on a separate line:
- Cost of Sales
- Gross Profit
- Admin Expenses
- Selling Expenses
- Operating Profit
- Finance Cost
- Profit before tax….. and so on
As you can see above that each line has a separate category of income or expense and under each category several related expenses and incomes are summed and reported in separate line of its own. Thus giving it separate status from each other so that user of information can clearly understand the expenses and incomes and their nature and other aspects.
Formally it has not been defined anywhere in the standards. But this is well known term in accountancy circle. May be because of that a particular definition has not been needed yet. But as discussed earlier it is used to represent different items in the financial statements which cannot be reported as one and must be kept separate.