Accounting in Malaysia

Bookkeeping, financial statements and the records the law says you must keep. 52 questions answered.

What is the difference between bookkeeping and accounting in Malaysia?Bookkeeping is the day-to-day recording of transactions: sales, purchases, payments and receipts. Accounting uses those records to prepare financial statements, interpret results and support decisions and tax filing. Good bookkeeping comes first, because accounts can only be as reliable as the entries beneath them.
Is a Sdn Bhd legally required to keep accounting records?Yes. Section 245 of the Companies Act 2016 requires every company, including its directors and managers, to keep accounting and other records that explain its transactions and financial position. This applies even to a new, dormant or loss-making company.
How long must a Malaysian company keep its accounting records?A company must keep accounting records for seven years after the transactions they record were completed. For tax, documents must be kept for seven years from the end of the relevant year of assessment. Use whichever period ends later.
What documents should a Malaysian company keep for bookkeeping?Keep every document that proves a transaction: sales and purchase invoices, receipts, bank statements, contracts, payroll records, and records of assets and loans. If a transaction is not supported by a document, it is hard to defend in an audit or tax review.
Can I keep accounting records and receipts in digital form only?Electronic records are accepted if they are complete, readable, accessible and can be converted into writing. Documents issued electronically, such as e-Invoices, can stay electronic. If you scan a paper original, the Income Tax Act says to keep the paper original as well.
In what language must accounting records be kept in Malaysia?Books and records should be in Malay or English. If original documents are in another language, such as Chinese, keep them, and expect to provide a written translation at the company's cost if LHDN asks. Financial statements lodged with SSM need a certified translation if not in Malay or English.
Where must a company keep its accounting records, and can they be kept abroad?Records must be kept at the registered office or another place the directors choose, and the directors must be able to inspect them at all times. Records of overseas operations may be kept abroad, but must be sent to Malaysia and be available to directors.
How soon must transactions be recorded in the books?Under section 245 of the Companies Act 2016, entries must be made in the accounting records within 60 days after the transaction is completed. Leaving the books for a full year-end rush is therefore not compliant.
Do sole proprietors and partnerships in Malaysia need to keep books?Yes. The Income Tax Act requires anyone with business income to keep sufficient records to work out their income. LHDN has a separate public ruling for businesses that are not companies. The Companies Act rules apply only to companies.
How do I choose my company's financial year end?You choose it, usually when you incorporate, and it is not fixed to 31 December. Pick a date that suits your business cycle and your accountant's workload; every later deadline for financial statements and filings is counted from it.
Can a company change its financial year end, and how?Yes. The Companies Act 2016 does not state a maximum length for a financial year or how often it can change. But a new year end that pushes the circulation or lodgement date later needs an extension of time from SSM, applied for before the original deadline. A subsidiary's year end must also stay in line with its Malaysian holding company's.
How long can a new company's first financial year be?A company's first financial statements must be prepared within 18 months of incorporation (section 248(1)(a) of the Companies Act 2016), so the first financial year can be longer than 12 months only within that limit. Later statements are due within six months of each year end.
What do a company's financial statements contain?A company's financial statements normally include a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity, a statement of cash flows and notes with accounting policies. The set must give a true and fair view.
Who prepares and approves a company's financial statements?Directors are legally responsible for the financial statements. An in-house accountant or external firm often drafts them, but the board approves them by resolution and signs a directors' statement. The statements are then presented to the members.
What is a directors' report and what must it say?The directors' report is a statement by the board attached to the financial statements. Under sections 252 and 253 and the Fifth Schedule of the Companies Act 2016 it names the directors, states the principal activities, results, dividends and directors' interests, and covers other prescribed matters. At least two directors sign it.
What is the deadline to send financial statements to members?A private company must circulate its financial statements to members within six months after its financial year end. A public company must circulate them at least 21 days before its annual general meeting, which must be held within six months of year end. Late circulation is an offence with a fine of up to RM50,000.
When must financial statements and the annual return be lodged with SSM?A private company lodges its financial statements with SSM within 30 days after circulating them to members; a public company within 30 days of its AGM. The annual return is a separate filing, due within 30 days after the incorporation anniversary. Late filing is an offence.
What is the difference between MPERS and MFRS?MFRS is the full set of Malaysian standards, aligned with IFRS, used by listed and regulated entities. MPERS is a shorter, simplified framework based on the IFRS for SMEs standard, designed for private entities. Both give a true and fair view; MPERS has fewer disclosures and simpler rules.
Who must use MFRS, and who can use MPERS?A private company that is not required to file financial statements under Securities Commission or Bank Negara law, and is not a subsidiary or associate of, or jointly controlled by, an entity that is, is a private entity and may use MPERS or full MFRS. Other entities must use MFRS.
Is there a simpler accounting standard for very small or micro companies?MPERS is already the simplified standard, and it is the lightest framework in common use for Malaysian companies. There is no further exemption that lets a very small company skip financial statements or the accounting framework, though some disclosures and audit rules differ for small companies.
Should my Malaysian company use cash or accrual accounting?Companies must use accrual accounting in their financial statements, because MPERS and MFRS both require it. You can track cash during the year for convenience, but the books must recognise income when earned and expenses when incurred.
What is a chart of accounts and how should I set one up?A chart of accounts is the list of categories you use to record every transaction, grouped into assets, liabilities, equity, income and expenses. Set it up so it matches your business and the headings you need in the financial statements and tax computation.
What is a bank reconciliation and why do it every month?A bank reconciliation compares your accounting records with the bank statement and explains every difference. It catches errors, missing entries, duplicate payments and fraud early. Doing it monthly is a core control for any business.
How should a small business manage accounts receivable and payable?Receivables are what customers owe you, and payables are what you owe suppliers. Record both when the invoice is raised or received, age them monthly, chase overdue customers, and pay suppliers on agreed terms. Doubtful debts must be assessed at year end.
How do I record fixed assets and depreciation in the books?Record equipment, vehicles and similar long-lived items as fixed assets at cost, keep a register, and charge depreciation over their useful lives. Small purchases below a policy threshold can be expensed straight away. Depreciation is an accounting charge, separate from tax capital allowances.
What is the difference between accounting depreciation and capital allowances?Depreciation is the accountant's charge in the financial statements, spreading an asset's cost over its useful life. Capital allowances are the tax law's own rates for claiming that cost against taxable income. The two usually differ, so the tax computation adds back depreciation and deducts allowances.
How should a small business account for stock and inventory?Record stock at the lower of cost and net selling price. Count it at least at year end, use a consistent cost method such as first-in-first-out or weighted average, and write down damaged or slow items. Stock errors change profit directly.
How is payroll recorded in the accounting books in Malaysia?Record gross salary as an expense, then record what you owe to employees and to the authorities: net pay, employee deductions, and the employer's EPF, SOCSO, EIS and HRDF contributions. Pay the liabilities when due and clear the payable accounts.
How much EPF must an employer and employee contribute?For Malaysian employees under 60, KWSP's Third Schedule sets the employer's contribution at 13% of monthly wages of RM5,000 or less and 12% above that, with the employee's share at 11%. Use KWSP's wage-band table for the exact amount, rounded up to the next ringgit.
How do SOCSO and EIS contributions work for employers?SOCSO (PERKESO) and EIS are paid monthly on employees' wages up to a ceiling of RM6,000 (from 1 October 2024). For employees under 60, SOCSO is 1.75% employer and 0.5% employee; EIS is 0.2% each, as at October 2026 according to PERKESO. Payment is due by the 15th of the following month.
What is PCB and how does it affect payroll bookkeeping?PCB (Potongan Cukai Bulanan) is the monthly income tax that an employer deducts from an employee's salary and pays to LHDN on the employee's behalf. In the books it is a liability held until paid, not an expense of the company.
What is the HRD Corp (HRDF) levy and is it mandatory for my company?The HRD Corp levy is a monthly payroll-based contribution that funds training. According to HRD Corp's FAQ, employers in covered sectors with 10 or more Malaysian employees must register and pay 1% of monthly wages; employers with 5 to 9 may register voluntarily and pay 0.5%.
How does e-Invoicing change my bookkeeping?E-Invoicing means sales invoices are validated through LHDN's MyInvois system, so your records must tie each sale to a validated e-Invoice with its unique identifier. Bookkeeping changes in how invoices are issued, corrected and stored, not in how profit is calculated. Tax rules are covered elsewhere.
Which businesses must issue e-Invoices, and from when?LHDN's timeline: above RM100 million from 1 August 2024, RM25m to RM100m from 1 January 2025, RM5m to RM25m from 1 July 2025, and up to RM5 million from 1 January 2026. Taxpayers with annual turnover or revenue below RM3 million are exempt, per LHDN's page updated 30 August 2026.
How do consolidated e-Invoices and credit notes work in the books?A consolidated e-Invoice lets a business summarise many small sales, such as retail cash sales, into one e-Invoice for the period, generally monthly. Returns and errors are handled by credit or debit notes. Record each in the ledger with its reference so sales totals tie to what was submitted.
What are management accounts and do I need them?Management accounts are internal reports, usually monthly, showing profit, cash, receivables, payables and key figures so owners can make decisions. They are not required by law, but they help you spot problems early. They do not replace statutory financial statements.
What should I look for when choosing accounting software?Choose software that handles Malaysian needs: SST, e-Invoicing through MyInvois, payroll statutory contributions, ringgit and foreign currency, bank feeds and a clear audit trail. Check data export, support, user permissions and total cost. Cloud versions make it easier to share access with your accountant.
Should I do bookkeeping myself, hire a bookkeeper or outsource it?Do it yourself when transactions are few and you have the time and discipline. Hire in-house when volume justifies a regular role. Outsource when you want expertise without a full salary. Whichever you choose, the directors stay legally responsible for the records.
What affects how much bookkeeping costs in Malaysia?Cost depends mostly on the number of transactions, how organised your documents are, whether you have payroll, stock, SST or foreign currency, how many bank accounts you use, and whether the work is current or backlogged. There is no official fee scale, so compare written quotes.
How do I catch up on bookkeeping that has been neglected for a year or more?Gather every document and all bank statements, set a cut-off date, then record month by month starting from the oldest period, reconciling banks as you go. Fix the biggest gaps first and get professional help for anything unclear. File overdue statements and returns as soon as the books are ready.
What happens if my company has years of unrecorded accounts or unfiled statements?The company and its officers may face compounds or prosecution for missing records and late filings, and LHDN may raise estimated assessments. The usual way forward is to rebuild the books, file the overdue statements and returns, and settle compounds. Get professional help early.
What documents should I get when switching accountants or bookkeepers?Ask the outgoing provider for your ledgers, trial balance, financial statements, working papers that belong to you, tax computations, filing acknowledgements, payroll records and all your original documents. Request an export from the software, then confirm the new provider can open it.
How should director's loans and current accounts be recorded?Record every movement between the company and a director in a director's current account: money the director lends in, and money taken out. A company generally cannot lend to directors except under limited exceptions in the Companies Act 2016, so a debit balance needs prompt attention.
What is wrong with using business money for personal expenses?A company is a separate legal person, so its money is not the owner's. Paying personal bills from company accounts muddles the books, may breach restrictions on loans to directors, and can lead LHDN to disallow expenses or treat payments as income. Use a director's account or proper salary instead.
Does a dormant company still need accounts and filings?Yes. A dormant company must still keep records, prepare financial statements, lodge them and the annual return with SSM, and file tax returns. It may be exempt from audit under SSM Practice Directive 10/2024. Consider striking off if it has no future.
What penalties apply under the Companies Act for poor accounting records?Failing to keep proper accounting records under section 245 of the Companies Act 2016 is an offence by the company and every officer. On conviction, the fine can be up to RM500,000, imprisonment up to three years, or both. Late financial statements or annual returns are separate offences.
What can LHDN do if my business records are missing or insufficient?LHDN can disallow expenses you cannot support, estimate your income and raise an assessment, and impose penalties. Failing to keep sufficient records is also an offence: LHDN's public ruling gives a fine of RM300 to RM10,000, imprisonment of up to 12 months, or both.
What if I lost a receipt or invoice for a business expense?First ask the supplier for a duplicate copy or statement. If that fails, assemble alternative evidence such as the bank record, a written explanation and any correspondence. Alternative evidence may support the entry, but tax deduction is not guaranteed, so do not create fake documents.
Does a foreign-owned Malaysian company have different accounting requirements?No. A Malaysian company with foreign shareholders follows the same Companies Act and tax record-keeping rules as any other. You may need extra reporting for your parent company, but it is separate from the statutory accounts filed in Malaysia.
What is the difference between a bookkeeper, accountant, auditor and company secretary?A bookkeeper records transactions. An accountant prepares financial statements and tax computations. An auditor independently examines the statements and reports on them. A company secretary manages company law filings and records. These roles are separate; the auditor must be independent of the preparer.
How should a small business handle petty cash and cash sales records?Keep a petty cash float with a fixed amount, one custodian, a voucher for every payment and regular reconciliation. For cash sales, record daily takings, bank the cash intact and match deposits to sales. This gives evidence for tax and protects against loss.
Do I still need to keep accounting records after my company is struck off or closed?Yes. Closing or striking off a company does not end the need for records. Section 245 requires seven years' retention, directors' and officers' liability continues after striking off, and LHDN can review past years. Decide who will hold the records and for how long before you close.