What is a chart of accounts and how should a small Hong Kong business set one up?
A chart of accounts is the numbered list of categories your ledger uses: assets, liabilities, equity, income and expenses. Keep it short, consistent and aligned to the statements you must produce. Separate accounts for director loans, MPF, tax and foreign-currency balances make year-end work easier.
The chart of accounts is the backbone of the ledger. Each transaction is coded to one account, and the account totals become the statement of financial position and profit and loss.
Typical structure
- Assets: bank accounts (one per account and currency), accounts receivable, deposits and prepayments, stock, fixed assets and accumulated depreciation.
- Liabilities: accounts payable, accruals, MPF payable, loans, amounts due to directors.
- Equity: share capital, retained profits.
- Income: by product or service line.
- Expenses: cost of sales, salaries, MPF employer contributions, rent, professional fees, depreciation, bank charges, travel.
Setup tips
- Start from your software's default list and delete what you will never use.
- Keep director-related accounts (loans, current account, expense claims) separate, because the Companies Ordinance requires director dealings to be disclosed in the notes (s.383).
- Use separate accounts for items that need different treatment at tax time, such as entertainment or capital purchases.
- Do not create a new account for every one-off; use a clear "other" bucket and review it.
Section 373 requires that records be able to explain transactions and show assets and liabilities, and a clean chart is how you meet that in practice.
Legal basis
- Companies Ordinance (Cap. 622), ss.373, 383
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- Does the Business Registration Ordinance require me to keep accounting records?Not directly. The Business Registration Ordinance deals with registering the business and notifying changes, such as a new business address or name, within one month. The duty to keep accounting records comes from the Companies Ordinance (for companies) and section 51C of the Inland Revenue Ordinance (for all businesses).
- How do I choose the financial year end for a new Hong Kong company?Directors can specify the first (primary) accounting reference date, as long as it falls within 18 months after incorporation. If no date is specified, the default is the last day of the month in which the first anniversary of incorporation falls. Choose a date that suits your business cycle and workload.
- What accounting should I set up when I start a new Hong Kong company?Open a company bank account, choose your financial year end within 18 months of incorporation, set up a ledger or software with a clear chart of accounts, and start filing documents from day one. Appoint someone to keep the books, and arrange an auditor and an accountant early.
- What is the difference between bookkeeping and accounting in Hong Kong?Bookkeeping is the day-to-day recording of transactions: sales, purchases, payments and receipts. Accounting uses those records to prepare financial statements, interpret results and support tax and audit work. In Hong Kong the law cares about both: the company must keep adequate records, and its directors must prepare financial statements from them.
- Is a Hong Kong company legally required to keep accounting records?Yes. Section 373 of the Companies Ordinance (Cap. 622) requires every company to keep accounting records that explain its transactions and show its financial position and performance at any time. Directors who fail to take all reasonable steps risk a fine of HK$300,000, and up to 12 months' jail if the failure is wilful.