Hong Kong Accounting Basics

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What is the chart of accounts (Chart of Accounts), Income Statement (Profit and Loss Statement) and balance sheet (Balance Sheet)?

Chart of Accounts (Chart of Accounts)

It is a general catalog of all accounting transactions, functions as a book catalog. If you want to know the contents of a company, it is best to look at the chart of accounts. If you have a little bit of business operations to understand, then you will be able to review via the chart of accounts, and then quickly to the operating unit has a beginning concept.

Profit and Loss Statement

As the name suggests, it is used to calculate a company’s profit and loss table. In simple terms, read through the income statement, you can learn how much the company’s gross margin, net profit number. Many of my friends do not understand the difference between gross and net profit, and frankly, its importance can be big. Gross profit is revenue minus direct cost to the product or service. What direct costs? Suppose your company is selling popcorn, the direct cost of your product is the popcorn oil. The selling price minus the popcorn per cup per cup of popcorn popcorn cost of oil, is margin products. Why is it so important? Because it is used to calculate the company’s return to this point (Break Even Point), how many cups of popcorn in the end to sell the company to offset all costs (including rent, salaries, etc.). The net profit, the company’s net income one, that is capable of storing up real money.

Balance Sheet (Balance Sheet)

In simple terms, it is used to calculate the net worth of the company. It should be noted that the income statement reflects a period of time (eg: April 1, 2014 to March 31, 2015), while the balance sheet reflects a point in time (eg: March 31, 2015) . Balance sheet can be used for analysis of financial health of the company, its cash flow capacity, high debt levels will, will face closure crisis and so on. Particularly in the sale of a company, the net asset value of the balance sheet is an important factor to judge whether the company is worth buying.

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