Bookkeeping
Accrual basis bookkeeping
Accrual-basis bookkeeping for Hong Kong companies: income recognised when earned and expenses when incurred, prepared under HKFRS, with receivables, payables and MPF accruals kept current so the accounts your practising CPA audits reflect the year, not just the bank balance.
Bank reconciliation summary
Illustrative client · August 2026
HKD
| Account | Difference | Status | ||
|---|---|---|---|---|
| Operating account··4821 | 184,220.16 | 184,220.16 | 0.00 | Reconciled |
| Reserve account··0937 | 60,000.00 | 60,000.00 | 0.00 | Reconciled |
| Company card··1006 | (12,418.52) | (12,418.52) | 0.00 | Reconciled |
| Card processor clearing | 8,905.40 | 8,905.40 | 0.00 | Reconciled |
| Payroll clearing | 0.00 | 0.00 | 0.00 | Reconciled |
Last weekly runFri 28 Aug, every account agreed to its statement.
Two open itemsTwo card receipts requested from you, marked on the card account until they arrive.
Illustrative. An example of the document, not a client's figures.
Why accrual matters for a Hong Kong company
A company being audited under the Companies Ordinance needs financial statements that follow Hong Kong Financial Reporting Standards, which means revenue and expenses matched to the period they belong to, not simply the period cash moved. A cash-basis ledger has to be converted before the audit can begin, adding time and cost that accrual bookkeeping avoids from the start.
What accrual bookkeeping covers
Each month, revenue is recognised as it is earned rather than only when collected, and costs are recorded as they are incurred. Accounts receivable and accounts payable are kept current, accrued expenses such as unpaid supplier invoices or unbilled services are tracked and reversed on schedule, and MPF contributions are accrued in the month the relevant income was earned, not the month the payment cleared.
Profits tax and the two-tiered regime
Because Hong Kong's two-tiered profits tax bands, 8.25% on the first HK$2 million of assessable profits and 16.5% above it for corporations, are assessed on assessable profits for the year, accrual accounting gives a far more reliable read of where a company sits against those bands months before BIR51 is due, rather than a cash snapshot that moves around with payment timing.
Preparing for audit
Accrual books built this way become the working papers your practising Hong Kong CPA audits at year end: receivables and payables schedules, accruals and prepayments, and a trial balance that already reflects the period rather than needing adjustment at audit time.
Getting there
If your records are currently cash-basis, we convert prior periods so comparability is not lost; see catch-up bookkeeping for how that backlog work is scoped, and monthly bookkeeping for the ongoing service.
Questions
Frequently asked questions: Accrual basis bookkeeping
Is accrual accounting required in Hong Kong?
HKFRS, the basis your auditor works to, is prepared on an accrual basis. Cash-basis records have to be converted before a statutory audit can proceed.
Can you convert existing cash-basis history?
Yes. We rebuild receivables, payables and accruals for prior periods so the switch to accrual does not lose comparability with earlier reports.
How does this affect my profits tax position?
Assessable profits are measured for the year under the two-tiered bands, so accrual figures give a realistic read of that position well before BIR51 is filed.
Do you decide the accounting policies used?
We apply HKFRS consistently based on the policies your director or auditor sets; significant policy choices are confirmed with you, not made unilaterally.
Who decides which accounting policies apply, such as when revenue is recognised?
We apply HKFRS consistently and flag any judgement call, such as a bundled contract or a long-term project, to you and your practising Hong Kong CPA rather than choosing a policy on your behalf without discussion.
Why would my business need accrual instead of cash basis?
A bank covenant, an investor, or growth past a revenue threshold often requires accrual reporting under your region's accounting framework.
Can you convert cash-basis history into accrual?
Yes. We rebuild receivables, payables and accruals for prior periods so the switch does not lose comparability.
What software works with accrual basis bookkeeping?
Accrual basis bookkeeping runs inside QuickBooks Online or Xero, whichever you already use. If you are not yet set up in either, we can configure a file in your name so you keep ownership of it once the engagement is under way.
How do we get started with accrual basis bookkeeping?
Getting started with accrual basis bookkeeping begins with a short review of your current records and software access. Once that is done we confirm scope and timing in writing, and ongoing work begins on the schedule agreed with you.
Related services
- BookkeepingCash basis bookkeepingBooks kept on a cash basis, recording income and expenses when money actually moves, for owners who want simple books that match their bank balance.
- BookkeepingChart of accounts designA chart of accounts built around how your business actually operates, so reports answer real questions instead of forcing everything into generic categories.
Industries
Next step
Talk to the team that would run your books
A short call covers your setup, your software and what a first month would look like. You get a written scope and price after it.