Accounting standards vary from place to place. They form a necessary pillar for any business to run successfully. They are a set of regulations and procedures that accounts for the major functional areas of a company. These include the purchase of goods and services, sales of goods or services, payments to employees for wages earned, and financing activities such as obtaining debt, selling shares, and paying interest to lenders. This system includes specific components like accounts payable, billings and accounts receivable, fixed assets, inventory, and payroll.
Most companies usually have a department dedicated to accounting services. However, when functioning in a different country, especially China, that may have specific laws and regulations regarding accounting, the procedure can become overwhelmingly difficult.
An accounting system in Hong Kong, also called accounting applications/apps, is specially designed financial software for accounting professionals to manage and maintain the financial operations of an organization. The accounting systems can also be advanced enough to juggle a large corporation’s accounts, payable, tax, ledgers, invoices, salaries, and other company assets.
When an accounting system in Hong Kong works together with an accounting firm that understands the accounting standards adopted in Hong Kong, the company can function without any financial hiccups.
All businesses, whether domestic and foreign, must comply with the company laws of a country. This includes accounting laws and tax laws. Trying to establish a business in a foreign country is never easy and China is no exception (see our guide about WFOE set up).
With reliable financial software and cloud management storing your company’s records, accounts, and data, providing you with all the accounting help you might need, your company can easily achieve its highest potential.
Accounting System in Hong-Kong : Requirements
The Hong Kong Financial Reporting Standards (HKFRS) serves as the fundamental framework defining the accounting standards in Hong Kong. A company incorporated in Hong Kong is responsible for preparing proper accounting books and meeting annual statutory audit requirements.
According to the accounting standards, financial documents required by a business corporation include:
- Cash flow statement
- Policies on accounting
- A balance sheet at the end of the determined annual period of a company
- Notes on transactions and earning
- A complete income statement
- Changes in equity or changes arising from capital transactions
The following is a list of requirements for all registered companies:
All companies registered in Hong Kong have to keep organized annual records and accounts according to the regulations. The records must include expenses, bank statements, and sales receipts.
Bookkeeping helps to track comprehensive records of financial transactions that are accurate and up to date. In some cases, income statements and balance sheets are also prepared once bookkeeping is complete.
Annual Financial Statements
Hong Kong requires all companies to provide annual financial statements with a detailed profit and loss statement, balance sheet, cash flow statement, and statement of changes in equity.
While it is compulsory for public entities to file their annual statements with the Companies Registry, private companies may only maintain proper accounts and store them at the company office.
An audit requires the verification of financial statements, profits, and taxes payable to the government. A third party will review the documents to ensure that the company accounts are in line with the accounting laws of Hong Kong. According to the Companies Ordinance, mandatory annual audits of all financial statements are required for all Hong Kong incorporated companies. These are conducted by an auditor licensed as a Hong Kong Certified Public Accountant (CPA) who will then prepare an Audit Report.
Financial statements that are presented to the auditor include:
- Bank statements
- Expenditure receipts
- Financial statements
- Management accounts
- Other relevant accounting documents
- Sales and purchase invoices
- Balance sheet
- Ledger of business transactions
- Income statement
Accounting System in Hong Kong for your Business
Accounting systems in Hong Kong translate into efficiency, and efficiency in the business world is a determinant of growth and success. Financial software coupled with cloud management services, and data storage help in maintaining company ledgers, reduce redundancy in records, budgeting, forecasting, and planning information.
Advanced accounting systems are capable of detailed asset management and employee expense management.
The core processes of an accounting support service include dealing with accounts receivable, invoice processing, and automatic invoicing.
An accounting system in Hong Kong can undertake the following tasks:
- Payment processing
- Accounts payable (like purchase orders, track credit memos, schedule automatic payments, creating a database for tax forms)
- Payroll (handling direct account wage payments to automatic tax calculations)
By collecting all transactions into one place and using software to interpret the financial data of a corporation, one can easily control the flow of assets, track expenses, file for tax returns, automate invoices, maintain bank statements, etc.