Close & reporting
Accruals
Expenses and revenue recorded in the period they actually happen, even when the invoice, the MPF contribution or the payroll return has not moved yet, so a Hong Kong company's monthly numbers reflect that month's activity rather than whichever month the paperwork happened to arrive.
Management report
Illustrative client · August 2026
HKD
| Line | Aug | Jul | |
|---|---|---|---|
| Revenue | 142,380 | 131,904 | +10,476 |
| Cost of sales | (51,260) | (48,115) | (3,145) |
| Gross profit | 91,120 | 83,789 | +7,331 |
| Payroll | (46,300) | (45,900) | (400) |
| SoftwareNoted | (6,480) | (5,490) | (990) |
| Rent | (8,000) | (8,000) | 0 |
| Other operating | (9,215) | (9,870) | +655 |
| Net income | 21,125 | 14,529 | +6,596 |
Reviewer's note
Software is up on last month after two seats were added mid-month. Revenue includes one milestone invoice that will not repeat next month.
Illustrative. An example of the document, not a client's figures.
Why the timing matters
An expense that belongs to March but only gets billed in April, if left unaccrued, understates March and overstates April, which distorts everything built on top of the close: the management report, the KPI dashboard, the board pack.
Recurring accruals in a Hong Kong company
Utilities, professional fees and payroll-related liabilities are the usual list, but Hong Kong companies also carry a specific one: the employer's MPF contribution, 5% of the employee's relevant income each month, which is accrued in the month it relates to regardless of when it is actually paid to the trustee. Around the Employer's Return, the annual Form BIR56A is issued on 1 April and must be filed within one month of issue, and any related payroll figures are reconciled to the close in the month that filing falls due.
Revenue can accrue too
Work delivered but not yet invoiced is recorded as accrued revenue in the period it was earned, then reversed once the actual invoice goes out, so revenue is never counted twice.
Cash-basis companies still benefit
Some smaller Hong Kong companies keep cash-basis books for simplicity. Many still want an accrual view for management decisions, which we can maintain alongside the cash-basis books without changing how the company itself is run day to day.
What gets reviewed each month
A recurring accrual list updated and reviewed every period, and a reversal of prior-month accruals once the actual bill or payment lands, both checked as part of every month-end close.
Questions
Frequently asked questions: Accruals
Why record an expense before the invoice arrives?
So the month it belongs to carries the cost, rather than the month the invoice happens to arrive, which can be weeks later.
How does MPF fit into monthly accruals?
Employer MPF contributions, 5% of the employee's relevant income, are accrued in the month they relate to, even if the actual payment to the trustee happens slightly later.
What is the BIR56A and how does it connect to accruals?
It is the annual Employer's Return, issued 1 April and due within one month of issue; the payroll figures behind it are reconciled against the accruals already booked through the year.
Do accruals apply if we run cash-basis books?
Not for tax purposes, but many cash-basis Hong Kong companies still want an accrual view for management decisions, which we can maintain alongside the cash-basis books.
Do accruals reverse automatically the following month?
Yes. Once the actual invoice or payment lands, the accrual is reversed and the real figure takes its place, so the same cost is never counted twice across two separate monthly periods on your books.
Why record an expense before the bill arrives?
So the month it belongs to carries the cost, rather than the month the invoice happens to show up, which can be weeks later.
Do accruals apply if I run cash-basis books?
Not for tax reporting, but many cash-basis businesses still want an accrual view for management decisions, which we can maintain alongside the cash-basis books.
How is accruals priced?
Pricing for accruals 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 accruals?
Accruals 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
- Close & reportingPrepaid schedulesInsurance, software subscriptions and other costs paid up front spread across the months they actually cover, instead of hitting one month's profit and loss all at once.
- Close & reportingMonth-end closeA repeatable monthly close that ties every account back to source records and hands you a finished set of financials on a predictable date each month.
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.