Above the line
What is Above the Line?
Revenue and Expenses that have a direct effect on the income statement are known as above the line. Above the line is widely used for the income and expenses that are covered by the income statement and this doesn’t cover items or transactions that are subject to the Cash flow statement. Meanwhile, it’ll cover items that are related to the cost of goods sold.
Another way of expressing above the line is, that it’s related to the gross margin. Under this concept revenue and COGS are considered as above the line item and all other expenses are counted as below the line.
The Difference Between Above the Line and Below the Line Expenses:
The expenses that incur regularly and are expected are called above the line. The expenses that are not incurred every day and are not a subject of the income statement are called below the line. Above-the-line expenses are directly connected to the operations of a business. However, below-the-line expenses are referred to as losses to the business.