Comprehensive Accounting, Audit, and Tax Filing Services in Hong Kong

Accounting: managing and maintaining accurate financial records, include:

• Bookkeeping – Recording daily financial transactions such as sales, expenses, and bank entries
• Preparation of Financial Statements – Compiling income statements, balance sheets, and cash flow statements
• Accounts Reconciliation – Ensuring all records match with bank statements and ledgers
• Management Reporting – Providing regular reports to help with business decisions

Audit is an independent examination of a company's financial statements to ensure they are accurate, complete, and prepared in accordance with applicable accounting standards and legal requirements.

In Hong Kong, most private companies are required to have their financial statements audited annually by a certified public accountant (CPA). The audit provides assurance to shareholders, investors, banks, and regulatory bodies that the company's financial records are reliable and free from material misstatement.

An audit typically involves reviewing accounting records, testing transactions, evaluating internal controls, and issuing an audit report that states whether the financial statements present a true and fair view of the company's financial position.

1. Income Statement (Profit and Loss Statement)

• Shows the company's revenues, expenses, and net profit or loss over a specific period (e.g., monthly, quarterly, yearly).
• Helps assess profitability and operational efficiency.

Key elements:

• Revenue / Sales
• Cost of Goods Sold (COGS)
• Gross Profit
• Operating Expenses
• Net Profit or Loss

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2. Balance Sheet (Statement of Financial Position)

• Provides a snapshot of the company's financial position at a specific point in time.
• Shows what the company owns (assets), owes (liabilities), and the shareholders' equity.

Key elements:

• Assets (e.g., cash, inventory, equipment)
• Liabilities (e.g., loans, accounts payable)
• Equity (e.g., share capital, retained earnings)

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3. Cash Flow Statement

• Tracks the movement of cash in and out of the business over a period.
• Divided into operating, investing, and financing activities.

Key elements:

• Net cash from operating activities
• Net cash used in investing activities
• Net cash from financing activities
• Net change in cash

Comparison of Financial Statements

Aspect	Cash Flow Statement	Income Statement	Balance Sheet
Purpose	Tracks cash inflow and outflow	Shows profitability over time	Snapshot of financial position
Time Coverage	Covers a period (e.g. monthly, annually)	Covers a period (e.g. monthly, annually)	Specific point in time (e.g. year-end)
Focus	Liquidity and cash management	Revenue, expenses, and net income	Assets, Liabilities, and Equity
Key Components	Net cash from operating activities Net cash used in investing activities Net cash from financing activities Net change in cash	Revenue / Sales Cost of Goods Sold (COGS) Gross Profit Operating Expenses Net Profit or Loss	Assets (e.g., cash, inventory, equipment) Liabilities (e.g., loans, accounts payable) Equity (e.g., share capital, retained earnings)
Output Example	Net cash flow from activities	Net profit or loss	Net worth of the company

Our accounting and audit fees are determined based on your company's annual revenue, transaction volume, and the complexity of the required work. After your company has completed its first year of operations, simply submit all relevant business transaction records to us. Our team will review the documents and provide a tailored fee quote reflecting the actual scope of accounting and audit services needed.

In Hong Kong, companies are subject to Profits Tax on income derived from business activities conducted within the Hong Kong. The Inland Revenue Department (IRD) requires annual filing of Profits Tax Returns, accompanied by Audited Financial Statements (Audit Report) and Tax Computations.

• Annual Filing: Companies must file a Profits Tax Return annually.
• Supporting Documents: Submission should include a Audit Report and a Tax Computation detailing adjustments to accounting profits.

In Hong Kong, a Profits Tax Return (PTR) is an official form issued annually by the Inland Revenue Department (IRD) to companies for reporting their assessable profits. All Hong Kong incorporated companies—whether or not they made a profit—are required to complete and submit this form.

The IRD typically issues the first Profits Tax Return about 18 months after the company's incorporation date, and then annually at the beginning of each tax year (usually around April). The completed Profits Tax Return must be submitted within one month of the issue date, along with the company's Audited Financial Statements (Audit Report) and Tax Computation. However, companies may usually apply for an extension if additional time is needed to prepare the documents.

At Prepdy, Profits Tax Return filing is included in our accounting and audit services. Once the audit report is finalized, we will prepare the PTR and submit it to the IRD on behalf of the client.

An Audit Report is the result of a statutory audit conducted by a Certified Public Accountant (CPA) in Hong Kong. It provides an independent opinion on whether the company's financial statements present a true and fair view, in accordance with Hong Kong Financial Reporting Standards.

Under Hong Kong law, all limited companies are required to prepare audited financial statements annually. The auditor's role is to examine the company's accounting records, verify supporting documents, and ensure the accuracy and integrity of financial reporting. The completed audit report includes:

• The auditor's opinion
• The audited financial statements
• Explanatory notes and disclosures

The Audit Report is a core deliverable under Prepdy's audit services and will be issued upon completion of the audit process. It must be submitted together with the Profits Tax Return to the Inland Revenue Department (IRD).

A tax computation is a working document that calculates a company's assessable profits based on the audited financial statements. It adjusts the accounting profit by adding or deducting items as required under Hong Kong's tax laws (e.g., disallowed expenses, depreciation allowances, etc.).

Once the adjustments are made, the final assessable profits are multiplied by the applicable HK Tax Rates to determine the company's Profits Tax liability.

This Tax Computation must be submitted to the Inland Revenue Department (IRD) along with the Profits Tax Return and the Audited Financial Statements.

Prepdy's accounting and audit services include the preparation of the Tax Computation, ensuring it aligns with the audit findings and complies with current tax regulations.

Hong Kong adopts a territorial source principle for taxation. This means that only profits which arise in or are derived from Hong Kong are subject to Profits Tax. Profits earned outside Hong Kong may be exempt, provided that sufficient documentation is available to support the offshore claim.

All Hong Kong-incorporated limited companies are generally subject to the two-tiered Profits Tax rate system, which is designed to ease the tax burden for small to medium-sized enterprises:

• First HK$2 million of assessable profits: taxed at 8.25%
• Profits exceeding HK$2 million: taxed at the standard rate of 16.5%