Payroll tax expense appears in the company's financial statements in which place?

• A. Balance Sheet
• B. Accrued payroll
• C. Income statement
• D. Salaries expense

Answer: (C)

Payroll tax expense is an expense recognized for the period and is reported on the income statement. In accrual accounting, expenses are matched to the period they relate to and appear in the income statement, reducing net income. The corresponding obligation to pay those taxes shows up on the balance sheet as a current liability (accrued payroll) if unpaid, but that is the liability side, not the expense location. Often payroll taxes are shown within the salaries/wages expense line on the income statement, reinforcing that the proper reporting place for the expense itself is the income statement.