STEP 2 of ACCOUNTING PROCESSES IN HK: CREATING VOUCHERS

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Step 2: Creating Vouchers

Now that all your invoices and receipts are sorted (See Step 1), the accountant must create vouchers. A voucher is made for the income earned each month, and the different expenses incurred each month. In accounting, earned income and incurred expense does not necessarily mean money was collected or spent.

  • Earned income means a product or service was given. If you receive payment before the product/service was given it is a liability titled unearned revenue. Common examples would be gift cards and pre-order sales. If you give your product out before receiving a payment it is an asset called accounts receivable.  
  • Incurred expenses mean the service or product was used. Expenses are the opposite of income. So, if you pay before you incur an expense it is an asset named prepaid expense. For instance, if you pay rent for the entire year at the start of the year, it would be classified as prepaid rent at that time. Conversely, if you incur an expense but have not paid, it is a liability that can be termed accounts payable.

These rules are a part of the Hong Kong accounting method. In order to abide by these rules, we ask our clients to send in invoices, receipts, and bank statements for at least one month prior and after their accounting period. This practice helps us determine what payments, goods, or services are still incoming and/or due in order to properly categorize them.

The vouchers put all of these rules and categorized invoices together. The vouchers also include information on the payment method (i.e. credit card, bank transfer, PayPal), date, and total monthly amounts. The payment method is important because it is used as reconciliation. That is, the accountant wants to ensure that the statements and invoices match. When the vouchers are complete, they will be joined with the matching invoices.

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