An income statement provides a detailed look at how much profit a business makes in an accounting period. Relied on by banks and other lenders as a reflection of business performance, an income statement accounts for sales revenue, associated expenses and any dividend distributions to reflect a net profit. Accounting for salary expenses properly in your income statement reporting will ensure an accurate representation of your business activity.
Total the gross pay for manufacturing employees and all other employees directly involved in the production process if you manufacture your own products. Add the costs for benefits and employer taxes as booked for the period. Include this total in the Cost of Goods Sold section of the Income Statement. Skip this step if you do not have manufacturing staff.
Add the total salaries for your administrative and support staff, including sales and management.
Total the cost of employer taxes and benefits for the administrative and support staff. Add this total to your salary expense. Include this cost in your General Administrative expense section of the income statement.