Bookkeeping
Cash basis bookkeeping
Cash-basis bookkeeping for Hong Kong sole proprietorships and small unincorporated businesses: income and expenses recorded when money actually moves, reconciled each month in Xero, QuickBooks Online or Zoho Books, kept simple for a business that does not yet need HKFRS-standard accrual accounts.
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.
Who this suits in Hong Kong
Cash-basis bookkeeping fits sole proprietorships and small unincorporated businesses that are not incorporated under the Companies Ordinance and so do not carry the statutory audit obligation that every Hong Kong company faces. For that kind of business, a simple ledger that matches the bank balance is often all that is needed month to month.
What we record
Income is recorded when it is received and expenses when they are paid, matched against your bank and card statements each month. There is no accrual of unbilled work or unpaid supplier invoices, which keeps the books quick to read and easy to reconcile against the actual cash position of the business.
Two-tier profits tax for unincorporated businesses
Unincorporated businesses in Hong Kong are taxed under their own band of the two-tiered profits tax regime: 7.5% on the first HK$2 million of assessable profits and 15% above that. Cash-basis books make it straightforward to see where your business sits against those bands as the year goes, since the figures track what has actually been received and paid.
No VAT to build in
Hong Kong has no VAT, GST or general sales tax, so cash-basis bookkeeping here has none of the VAT-cash-accounting complications that some other markets carry. What we do keep current is MPF: self-employed persons must make mandatory MPF contributions of 5% of relevant income, and we track those alongside the rest of the ledger.
When to move to accrual
If the business incorporates, takes on investors, or grows past the point where a simple cash view stops being useful, accrual-basis bookkeeping is the natural next step, and we tell you plainly when that point is approaching rather than leaving it for you to discover.
Questions
Frequently asked questions: Cash basis bookkeeping
Is my business eligible for cash-basis bookkeeping in Hong Kong?
Most sole proprietorships and small unincorporated businesses can use it. Companies incorporated under the Companies Ordinance need accrual-basis accounts for their statutory audit.
Do self-employed owners still need to make MPF contributions?
Yes. Self-employed persons must contribute 5% of relevant income to MPF, subject to the same minimum and maximum income levels as employees, and we track this in your books.
Is there a VAT step to worry about?
No. Hong Kong has no VAT, GST or general sales tax, so there is nothing to account for there.
Can you tell me when to switch to accrual?
Yes. As the business grows, takes on debt covenants, or incorporates, we flag when accrual-basis accounting will serve you better and help plan the switch.
Can you tell us when our business should switch from cash to accrual accounting?
We can flag common signals, such as growing stock or receivables, but the decision and its Profits Tax implications are confirmed with your practising Hong Kong CPA, since it depends on your specific facts rather than a general rule.
Is cash basis allowed for my business?
Most small businesses can choose cash basis. Certain entities with inventory or above a revenue threshold may need to use accrual instead; we flag that during onboarding.
Can I switch to accrual later?
Yes. We convert existing cash-basis books to accrual when a lender, investor or your own growth calls for it.
How is cash basis bookkeeping priced?
Pricing for cash basis bookkeeping depends on your transaction volume, the software you use, and how much cleanup is needed before ongoing work starts. Current ranges are published on the pricing page, and your exact fee is confirmed in writing before anything begins.
What software works with cash basis bookkeeping?
Cash 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.
Related services
- BookkeepingMonthly bookkeepingOngoing monthly bookkeeping: transactions sorted into categories, accounts reconciled and month-end reports delivered in the software you already use.
- BookkeepingAccrual basis bookkeepingBooks kept on an accrual basis, matching income and expenses to the period they were earned or incurred, so reports reflect the real state of the business.
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.