Ask Joey ™ a Question

What does the phrase “above the line mean”?

In the phrase “above the line”, the line is generally referring to gross profit. Therefore, any costs or expenses that are above the line refer to costs incurred to make the product or provide a service.

Any costs “below the line” would be operating expenses, or those costs that are not directly incurred to produce the product or provide the service.

So in the example below, cost of goods sold of $400 would be above the line, while operating expenses and non-operating items would be “below the line.

It’s important to note that this phrase can vary depending on business type or by company. Its a very subjective phrase that does not have a specific formula or definition. Therefore, the phrase “above the line” could even refer to all items included in operating income.


You might also be interested in...

  • How can variable sampling risk impact the efficiency or effectiveness of an audit?

    Audit risk is comprised of inherent risk, control risk, and detection risk. The level of substantive testing that the audit performs is based on detection risk, which is set after the audit team assesses inherent risk and control risk. Variable Sampling – Substantive Testing When the audit team is performing substantive testing, they will use […]

  • What happens if control risk is set too high or too low?

    Audit risk is comprised of inherent risk, control risk, and detection risk. Depending on how the audit team assesses control risk, they would set detection risk, which determines the level of substantive testing that should be performed. To assess control risk, the audit team would use attribute sampling to determine if the controls were operating […]

  • What is business intelligence?

    In general, business intelligence is the strategy and technology used by a company to analyze their data. There are a number of difference functions that fall under the business intelligence umbrella. These include analytics, data mining, processing mining, use of dashboards, etc. The biggest problem most companies face is that they have a ton, and […]