What is a bank reconciliation and why should a Hong Kong business do it every month?
A bank reconciliation compares the cash book to the bank statement and explains every difference, such as cheques not yet cleared or bank charges not yet recorded. Doing it monthly catches errors, duplicate payments and fraud early, and gives a reliable cash figure for the books.
What it is. At the end of each month, you match every entry in your ledger's bank account with the bank statement. Whatever does not match is investigated and listed.
Steps
- Start with the closing balance on the bank statement.
- Add deposits recorded in your books but not yet credited by the bank.
- Subtract cheques or payments recorded in your books but not yet cleared.
- The result should equal the ledger balance. If not, look for missed bank charges, interest, wrong amounts, duplicates or entries in the wrong period.
- Record the missing items (charges, interest) in the ledger and keep the signed or dated reconciliation as evidence.
Why monthly
- The law requires records that show financial position with reasonable accuracy at any time (s.373), and the bank balance is the easiest figure to check.
- It exposes unauthorised payments and duplicate supplier payments while the bank can still help.
- It makes the auditor's work faster, because the cash balance is already agreed.
Multi-currency accounts. Reconcile each currency account in its own currency first, then check the Hong Kong dollar equivalent.
Reconcile credit card and payment-platform statements the same way.
Legal basis
- Companies Ordinance (Cap. 622), s.373
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
- 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.
- How long must a Hong Kong company keep its accounting records?Seven years. Under section 377 of the Companies Ordinance, a company must keep its accounting records for 7 years after the end of the financial year to which the last entry relates. The Inland Revenue Department separately requires business records to be kept at least 7 years after the transactions they relate to.
- What does section 51C of the Inland Revenue Ordinance require from my business?Anyone carrying on a trade, profession or business in Hong Kong must keep enough records, in English or Chinese, to work out assessable profits, and keep them for at least 7 years. Failing to do so without reasonable excuse can lead to a fine of up to HK$100,000.
- Which documents should a Hong Kong business keep for its books?Keep every document that supports an entry in your books: sales and purchase invoices, receipts, bank statements, contracts, payroll and MPF records, asset purchase papers, loan agreements, and stocktake sheets. The test is whether someone else could trace any figure back to its source.
- Can a Hong Kong company keep its accounting records digitally or scan paper originals?Yes. The Companies Ordinance allows records in hard copy or electronic form, provided they stay available for reference and can be reproduced on paper. The IRD also accepts electronic books and scanned source documents if integrity, legibility and origin details are preserved, and no prior approval is needed.