What is meant by the elements and items of the terms as they relate to the income statement? Why might items have to be disclosed in the income statement?
Elements are the basic ingredients which comprise the income statement; that is, revenues, gains, expenses, and losses. Items are descriptions of the elements such as rent revenue, rent expense, etc.
In order to predict the future, the amounts of individual items may have to be reported. For example, if "income from continuing operations" is significantly lower this year and is reported as a single amount, users would not know whether to attribute the decrease to a temporary increase in an expense item (for example, an unusually large bad debt), a structural change (for example, a change in the relationship between variable and fixed expenses), or some other factor. Another example is income data that are distorted because of large discretionary expenses.
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