The rule

Section 51C of the Inland Revenue Ordinance requires every person carrying on business in Hong Kong to keep sufficient records of income and expenditure so that assessable profits can be readily ascertained, and to retain them for at least seven years. Failing to do so without reasonable excuse carries a fine of up to HK$100,000. The Companies Ordinance layers its own accounting-records duty on top for incorporated companies.

What counts as "records"

  • Books of account recording receipts and payments, income and expenditure
  • Invoices, receipts, vouchers and contracts underlying those entries
  • Bank statements for every business account
  • Records of assets and liabilities of the business
  • Where goods are traded: purchase and sales records detailed enough to identify the goods, and stocktaking records

The test is not "did you keep something". It is whether a third party (the IRD, or an auditor) could readily work out your profits from what you kept.

Why spreadsheets stop working

A spreadsheet can satisfy the law at very small scale. It fails in predictable ways as you grow: single-entry records that can't prove completeness, no reconciliation against the bank, formulas silently broken by an edit, and no audit trail of who changed what. The year the business gets busy is exactly the year the records fall behind, and the first profits tax return covers everything since day one.

What good looks like

A proper double-entry ledger, reconciled to the bank as transactions happen, with every entry traceable to a document. Kept that way, the year-end is an event measured in hours: the auditor gets a closed trial balance, the tax computation follows from the books, and the seven-year archive builds itself.

Where Suma fits

This is precisely the work Suma automates: a correct double-entry ledger that keeps itself, records retained and organised, and a partner CPA firm, with more than 40 years in practice, reviewing and filing what the software produces. Tell us about your business.

General information current as of mid-2026. This is not legal, tax or accounting advice. Confirm the current requirements with the IRD or a licensed practitioner.