Accounting

Under Section 373 of the Companies Ordinance (Chapter 622) of the Laws of Hong Kong, the director of a company is required to keep accounting records or accounts in accordance with the specifications. Section 51C of the Inland Revenue Ordinance (Chapter 112) also requires every person carrying on a trade, profession or business in Hong Kong to keep adequate records of his income and expense.
However, accounting is not only for the fulfillment of legal responsibilities, but also an indispensable part of the development of the company.

Usage of the accounting accounts :

Financial communication within the company

to help the boss and shareholders to understand and monitor the operating costs or the manufacturing costs of their products;
to help the management to make future financial forecasts, budgets and allocations;
to indicate the company’s financial status;
to find out the hidden operational crisis and take countermeasures as soon as possible;
to maintain a clear arrangement of income and expenditure records , so as to help the company’s operation to be more systematic;
to reduce the chance of company’s assets or money being stolen.

Financial communication with external stakeholders ( such as banks, creditors, investors )

to publish the company’s status through annual financial reports every year for listed companies;
to borrow money from a bank;
to invite new investors;
to cooperate with other companies for business;
to help to increase the chances of success in all business initiatives by means of good accounts.

Since the ultimate responsibility of accounting lies with the directors, it is better for directors to learn some basic accounting knowledge so that they can detect and correct mistakes in the company’s accounts promptly.